If we were seeking a mantra, we might just opt for "IT is the business," a quote from Netflix's Tom Dillon. In an InfoWorld interview, "Why IT gives business a competitive edge", the movie-rental company's COO was asserting that IT should be integral to a business's goals, not an afterthought or simply a support mechanism. The conclusion: When fully aligned -- even woven into -- core business strategy, IT can foster competitive advantage and drive market leadership.
Effective IT innovation, however, must be strategic. The trick is to devote the lion's share of in-house IT investments to unique business processes that can differentiate your company from the competition. "Management has to ask, 'What is the business?'" explains Senior Contributing Editor David L. Margulius, who spoke with honchos at JetBlue and BNSF Railway, as well as Netflix, for the article. All three companies are tops in their fields, in part because they were able to identify their core issues and apply their IT dollars wisely.
"For Netflix, the differentiator is price and speed; they've got to get DVDs to renters faster and cheaper than anyone else," Margulius says. "For JetBlue, it's the brand; customers choose the airline because they appreciate the service and feel good about the company. For BNSF Railway, it's all about asset utilization. They have thousands of locomotives, railcars, and yards. To excel, they have to keep all those trains running around the clock." Off-the-shelf software and rote implementations can't always deliver that kind of functionality. Strategic IT can aEuro ¦ and did for all three companies profiled.
But if management needs to pump its IT investments into core business processes, the corollary, "don't pour money into industry-standard, noncore basics," applies as well. That, conveniently, is the subject of Ephraim Schwartz's Reality Check.
Software as a service, aka SaaS, Schwartz says, is a great leveler. By allowing a third party to deliver and manage certain run-of-the-mill apps, businesses can achieve baseline functionality at minimal cost, especially when competitive differentiation is unnecessary.
As an example, Schwartz points to the manufacturing sector, where compliance regulations require companies to collect specific information. Either those companies are in compliance or they're not. "You don't get any bonus points for being more compliant than the next guy," he says. In that black-and-white scenario, it makes sense for companies to minimize their IT investment, matching but not exceeding the competition.
The money you save by subscribing to prebuilt commodity Web apps can be plowed right back into IT projects that differentiate your business. After all, there's no better investment in IT.