Additional Strategy Consulting Resources: Clarity Consulting offers many resources to help companies plan and execute successful business strategies. A few examples include:
Which capabilities make your company give your company its advantages? What does your company do better than anyone else? And is your IT organization aligned to build upon these strengths?.
All people gravitate towards their strengths. The best cook makes the meals for the family. The mechanically-inclined person fixes the squeaky door. The plant lover tends the garden.
Likewise, companies gravitate towards their strengths, but in a much more formal way. Successful businesses adopt a rigorous approach to identifying and defining their core competencies and then single-mindedly pursue them. Auto manufacturers have spent years restricting themselves to the tasks they do best -- designing and assembling automobiles -- offloading all of the ancillary steps to others. A web of suppliers produces the components that go into the car and a web of dealers sell, deliver and service the cars bought by consumers. By limiting their focus, auto manufacturers are able to perform the tasks they undertake extremely well. Fewer processes to monitor means the manufacturers are better able to control, monitor and measure their operations. Fewer extraneous tasks means less distraction for management and employees. A clearly defined mission means a more cohesive corporate culture and fully aligned employees.
These same principles are true for IT organizations. By playing to their strengths and focusing on their core competencies, IT organizations can provide many benefits to their parent companies. At the IT level, however, there is generally much less proactive, formal development of competence strategies compared to the business level. If IT truly wants to align itself with the company's objectives, it must confront the issue of its core competencies.
For IT, the need to focus on core competencies has never been greater. Technology has become incredibly complex and is simply too broad, and requires too many specialties, for IT to master every single category. IT's constituent base has also exploded and their demands are no longer possible to fulfill. Users, suppliers and customers stretch around the globe and want instant access to information. The demand for new applications, functionality and technology is incessant, and amid the din IT is supposed to continue to support everyday operations without a hiccup. Attempting to address every need, conquer every new technology and keep operations running at the same time is spreading IT organizations too thin.
The traditional, monolithic, hierarchical IT organization is a thing of the past. Organizational boundaries and skill sets are blurring as technically savvy business people and specialized vendors muscle in on IT's territory. Business people are adroit at using their PCs to do everything from updating web content to analyzing marketing data. Vendors offer turnkey software to supplant custom-developed internal applications and can perform any IT task on an outsourced basis. Competitors continue to encroach on IT's turf by developing competencies in areas that were formerly the exclusive domain of IT.
To survive in this atmosphere, IT has to identify and play to its strengths. It must coldly assess what it does best and concentrate on these core competencies. To thrive in this atmosphere, IT must outperform its competitors in each of these competencies.
You see it everywhere in magazine articles and advertisements, but what exactly is a core competence? At its simplest, a core competence is a unique capability that affords some type of competitive advantage. It corresponds to a business process, and involves underlying skills, functions, systems and knowledge. To determine if something is a core competence, ask yourself, "Does this 'thing' give the company a unique advantage over its competitors and help make the company profitable?" Using this question, it is easy to see that your average payroll function is not a core competence at most companies, unless you happen to be ADP. At Walmart, its major competitive core competence is its superior logistics system.
Within IT, skills, capabilities and functions are only core competencies if they directly support a business process that is itself a core competence. Payroll applications are not core competencies in companies other than ADP. But designing the technical architecture for and implementing a logistics system are core skills of Walmart's IT organization. Particular technical skills -- such as Java programming -- may be core competencies for those who possess them but are rarely strategic to the actual business of the company.
Core versus non-core distinctions have larger meaning to the IT organization, namely that IT provides only two types of services: value adding and commodity. In general, value adding services are those IT activities that underpin the company's core competence. They are worth a premium since they are able to create or enhance value well in excess of their cost. On the other hand, commodity activities tend to be generic, offering no unique advantage to the company. By their nature, commodity skills cannot possibly be core competencies and are candidates for sourcing outside the organization.
Interesting theories, but what do these propositions really mean to an IT organization? In short, if an IT organization is not providing value adding services that directly support the company's core competencies, it will have a difficult time justifying its continued existence. Playing to its core competencies requires an understanding on IT's part of: the needs of the company, the current capabilities of its organization, the desires of its employees and the alternatives available on the market.
This report proposes a six stage process to develop and implement a competence strategy for an IT organization. The six stages are:
This first stage focuses on articulating the company's overall needs and and translating them into requirements for IT capabilities, technologies, skills, etc. These company needs imply what the "ideal" IT organization should look like. At heart, this activity is the classic business-IT alignment exercise, and should not be performed exclusively by IT personnel. Corporate executives and business area managers must participate in analyzing the company's needs.
This stage seeks to capture current IT competencies in order to establish a baseline from which the IT organization must start to achieve its desired final state. Other factors assessed during this stage include the quality of the competence, its uniqueness and its value. These factors become significant later, when they are used to devise specific strategies to optimize IT's capabilities mix and to facilitate decisions on sourcing alternatives.
This stage compares and contrasts the IT capabilities implied by the company's needs (from stage 1) and those capabilities that are currently in place (from stage 2). The analysis creates an overall competence profile of the organization, and classifies issues and opportunities into categories to be addressed through a variety of strategy options.
Using the results from the situation analysis, this stage devises a strategy for developing and focusing on the core competencies that IT needs to have, for pursuing identified opportunities and for correcting excess, deficient or obsolete capabilities. These strategies are documented in a plan that will map competencies to specific delivery mechanisms and provide general guidelines about how to source IT competencies.
This stage performs the steps necessary to begin deploying the competence strategy. In general, the task of implementing the strategy will be like any other implementation project, with the same issues, problems and requirements. The implementation will not happen over night. Taking a long range view towards shifting competencies and spreading the implementation effort over two or more years reduces the disruptive effect of many simultaneous changes.
The sixth and final stage of the process involves the ongoing management of the competence plan and an evaluation of its results. Various techniques such as benchmarking, service level agreements and customer satisfaction surveys can be used to help manage and measure the progress of the plan.
In the quest to focus on core competencies, IT organizations can be leaders rather than followers. By starting a dialog within your company and by taking some of the constructive steps mentioned in this report, IT can start to fashion its own core competence strategy today.
NOTE: Clarity Consulting offers a full range of research, metrics development and analysis and consulting services to help companies identify and capitalize on their strengths to build a stronger business. We help companies identify opportunities for improvement, calculate ROI potential, establish metrics to track performance and optimize projects to maximize business yield. For more information about Clarity Consulting and our offerings, please visit our home page.
Copyright © 2011, Clarity Consulting, Inc. All rights reserved.