1. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 1 Creating Competitive Advantage with IT: A Business Value Perspective EMBA 514 Rob Anson, Ken Wiley March 15, 2013 Readings IT Doesn’t Matter? Nicholas Carr, HBR, 2003 IT Does So Matter! Kathleen Melymuka, Computerworld, 7/7/2003 The Grill: Nicholas Carr Joyce Carpenter, Computerworld, 3/3/2008 A Simple Framework to Translate IT Benefits Into Business Value Impact Richard Hunter, et. al., Gartner, 2008 Defining the Business Value of Cloud Computing Tyson Hartman and Larry Beck, 2009 White paper from Avanade consulting Pre Session Assignment : (Individual) One-Minute Brief Take a stand on whether or not IT matters in your organization (where you currently or recently worked) by recommending a new information technology or a new approach to IT. Briefly identify the technology or approach, and position it within the Gartner investment framework. Then argue for its adoption. In your argument, draw upon the discussions for or against Carr’s position, and the framework from the Gartner report.

2. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 2 Agenda Does IT Matter? ◦ In Principle  Discussion Strategic and Business Value Views of IT ◦ In Organizations  Stories--In your organization Obtaining Business Value From IT ◦ Investments in IT  Investment Competition Business Value Considerations in Cloud Computing ◦ Guest Speaker: Ken Wiley, Managing Principal, Wiley & Associates, LLC  Q & A

3. Slide 3 DOES IT MATTER?

4. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 4 IT Doesn’t Matter. Does so! Competitive Advantage at best fleeting IT ubiquitous, standardized, commoditized—opposite of scarce IT is a utility, an infrastructure, not a differentiator Firms should: ◦ Spend less ◦ Follow, don’t lead ◦ Focus on vulnerabilities, not opportunities IT is inherently strategic because it enables new things, which enables differentiation Computers are ubiquitous, but insight to use them is scarce IT enables incremental (not big bang) improvements  business change  advantage IT co-creates capacity

5. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 5 IT as a Game changer? IT can be a competitive advantage when ◦ Keep pace with competitive changes ◦ Agility to keep changing ◦ Innovate on multiple levels together What does it mean to “defend” one’s competitive advantage? ◦ Innovate faster ◦ Leverageable Advantage

6. Slide 6 STRATEGIC AND BUSINESS VALUE VIEWS OF IT “Conventional IT strategic planning is similar to a funeral for a head of state. It is infrequent, requires very powerful people to come together and be miserable, and the end result is buried and quickly forgotten.” (Anonymous)

7. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 7 Business Value for IT Equation BV(IT) = Business performance IT Spending Business performance: The ability of the enterprise to achieve or exceed its objectives. (Hunter, 2007) Mathematically, there are two ways to increase BV(IT)

8. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 8 BV(IT) = Business performance IT Spending Option One IT Spending is a cost to minimize in order to improve the business value of IT How can you improve the Business Value of IT spending? “IT Doesn’t Matter” Interpretation “Most strategies focus on providing efficient and effective IT services...”

9. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 9 BV(IT) = Business performance IT Spending Option Two IT Spending is a critical factor in achieving Business Performance. “IT Does Matter” Interpretation How can you improve the Business Value of each IT dollar spent? “IT spend that improves business performance is the cost of doing business in a particular way—not the cost of IT.”

10. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 10 How can IT spending help achieve Business Performance— create Business Value?

11. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 11 Porter Generic Strategies Framework Differentiation Overall Cost Leadership Uniqueness Perceived by Customer Focus Low Cost Position Industry wide Particular Segment Only Cost Focus Differentiation Focus (Pearlson & Saunders, 2010) Porter identifies three primary strategies for achieving sustained competitive advantage that derive from the company’s relative position in the marketplace.

12. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 12 Disruption and the 7 S’s Vision for Disruption Identifying and creating opportunities for temporary advantage through understanding Stakeholder Satisfaction Strategic Soothsaying Directed at identifying new ways to serve existing customers better or new customers that are not currently served by others Tactics for Disruption Seizing the initiative to gain advantage by Shifting the rules Signaling Simultaneous and sequential strategic thrusts With actions that shape, mold, or influence the direction or nature of the competitors response Capability for Disruption Sustaining momentum by developing flexible capacities for Speed Surprise That can be applied across actions to build temporary advantages Market Disruption (Pearlson & Saunders, 2010)

13. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 13 7 S’s ApproachDefinition Superior Stakeholder Satisfaction Understanding how to maximize customer satisfaction by adding value strategically Strategic SoothsayingSeeking out new knowledge that can predict or create new windows of opportunity Positioning for SpeedPreparing the organization to react as quickly as possible Positioning for Surprise Preparing the organization to respond to the marketplace in a manner that will surprise competitors Shifting the rules of competition Finding new ways to serve customers which transform the industry Signaling strategic intent Communicating the intended actions of a company, in order to stall responses by competitors Simultaneous and sequential strategic thrusts Taking a services of steps designed to stun and confuse competitors in order to disrupt or block their efforts (Pearlson & Saunders, 2010)

14. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 14 Organizational Views of IT Low High Business Perception of IT value IT delivers technology IT doesn’t deliver IT perceived as cost, not an investment in business performance CIO and IT team talk technology performance, not business performance IT performance metrics are technically- oriented IT follows business lead IT perceived as expensive and unresponsive Prelude to IT turnaround situation IT spend perceived as investment in business performance All IT + business conversations conducted in business terms IT performance metrics reflect business priorities All initiatives are business initiatives CIO leads business initiatives (Hunter, 2007) IT delivers business performance

15. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 15 Perceptions of IT in your organization How is IT perceived in your organization? Doesn’t Deliver….Delivers Technology…. Delivers Business Performance ◦ Evidence?  How is IT involved in the business?  How is IT measured?  How is IT managed?  How is IT discussed?

16. Slide 16 OBTAINING BUSINESS VALUE FROM IT

17. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 17 Specific Governance Practices for IT Investments Can Help Achieve Strategic Goals (CIO, 2003) Market Leaders, relative to other companies have greater alignment of IT with Business ◦ IT – Business management collaboration ◦ BU participation in IT Budget ◦ Cross-functional governance teams direct resources and adjust priorities ◦ Use business performance-based metrics for IT investments

18. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 18 Specific Areas of IT Investment Can Help Achieve Strategic Goals Market Leaders, relative to other companies… ◦ Larger proportional investment in automation  higher business performance ◦ More investment in decision support applications  improved decision making ◦ More investment in supplier-collaboration applications  efficient response to customer needs ◦ More IT investment on business agility to respond to demand fluctuations (vs. forecasting customer demand)  improve responsiveness ◦ More focus on customer self-service applications  improve service quality, speed, control, reduced costs (CIO Magazine, 2003) The most effective companies at managing their IT investments generate 40% higher returns than their competitors (Ross & Weill, 2002)

19. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 19 Business Context-Appropriate Metrics Can Improve IT Investment Decision Making Measure business value of IT in improved business performance as perceived by business stakeholder Use appropriate business metrics to build value proposition: ◦ Run-the-Business ◦ Grow-the-Business ◦ Transform-the-Business (Hunter et al, 2008)

20. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 20 Determining the Business Context (Hunter et al, 2008)

21. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 21 Apply Business Context-Appropriate Metrics for IT Investments Investment Category Value DefinitionExample Process Areas Example Metrics Run- the- business Operating essential business processes at Reduced cost, Improve price/performance, Reduced risk Procurement, Manufacturing/service delivery, HR, IT, Finance, Regulatory Price/performance ratio, Asset utilization, Sales costs, COGS Grow- the- business Visible operational improvements to whole value chain within current business models Marketing, CRM, Sales, Product development, Customer service Market Share, Time to Market, Sales cycle time, Customer retention Transform- the- business Creating new opportunities that transform the industry, market or enterprise Strategic planning, Marketing, Product development None (Hunter et al, 2008)

22. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 22 Summary Business value is obtained from IT investments when… IT is closely aligned with business Business & IT leaders are collaborators ROI is measured in terms of business performance The value metrics are appropriate to the purpose of the investment

23. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 23 Forming a Compelling Business Value Statement for an IT Investment IT Capabilities Changes to Business-- processes, capabilities, etc. Business and Operational Measures Business Context for Proposal Run, Grow, Transform Business Goals Competitive Strategies

24. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 24 Example: Compelling Business Value Statement for an IT Investment We need the ability to integrate our data on sales transactions from each store, so that we can centralize our ordering and distribution, to gain economies of scale, and quantity discounts. Our target is to cut vendor costs by 5% and reduce distribution costs by 10% within six months. Our Business needs to run its operations more efficiently in order to reduce prices relative to our competitors. Business Context for Proposal IT CapabilitiesChanges to BusinessBusiness Measures

25. Boise State University, Executive MBA, 2013 IT Competitive Advantage, Rob Anson Slide 25 IT Investment Competition 1. Develop (in groups) ◦ Select one OMB proposal ◦ Strengthen its compelling value statement (One flipchart) A. Business Context B. IT Capabilities C. Business changes to enable D. Measurable business effects 2. Presentations (Elevator Pitch) ◦ Each team: 5 min presentation, 2 min Q&A 3. Decide ◦ Class is the Board of Directors Goal: Select the best IT Investment for the Firm

26. Slide 26 KEN WILEY MANAGING PRINCIPAL, WILEY & ASSOCIATES MANAGING MEMBER, COMMAND TRENDS INTERNATIONAL What’s up with that Cloud thing? Guest Speaker