Strategy #4

1. Strategy #4

2. The Productivity Paradox • Productivity = Output/Input • How do you measure productivity? • How should output be measured? • How should input be measured? • What is the relationship between technology and productivity? • How about information technology?

3. Does IT investment lead to increased productivity? • Robert Solow – “You can see the computer age everywhere but in the productivity statistics.” • US annual rate of increase in output per hour in the 1960s (2.6%) • 1973 – 1995 (1.5%), • 1995 – 2000 (2.5%), then dot.com bust, • 2002 to present (>5.3%)

4. How Does IT Investment Affect Productivity? • Differences between national data, industry data, and firm level data • High level of variation between firms • Long term benefits from 2 to 8 times higher than short term benefits

5. Complementary Activities • IT support is most likely to improve the productivity of knowledge workers, especially where they can take advantage of low cost communications and data analysis • IT investment include a number of technologies in addition to computer hardware and software – e.g. BPR, work redesign, organizational change • Factors associated with increased IT productivity: self-directed work teams, decentralized decision making, screening for education and training investment, systems that reward high team performance

6. IT-Business Strategic Alignment • Ensuring that IT strategy is consistent with business strategy • Importance • Size of investment coupled with uncertain benefits • High cost of failure • Potential for IT to be transformative

7. Enablers and Inhibitors of Alignment

8. Strategic Alignment Maturity • Levels of maturity copied from Software Engineering Institute Capability Maturity Model • What are the assumptions? • Highly aligned relationships are better than those that are less aligned • A firm’s success is highly dependent on IT capability

9. Alignment Criteria (Communication) • IT understands business • Business understands IT • Knowledge sharing

10. Alignment Criteria (Measurement) • IT metrics • Business metrics • Balanced metrics • Service level agreements • Benchmarking • Formal assessment • Continuous improvement

11. Alignment Criteria (Governance) • Business strategic planning • IT strategic planning • Budgetary control • IT investment management • Prioritization • Steering committees

12. Alignment Criteria (Partnership) • Business perception of IT value • Role of IT in strategic planning process • Shared goals, risks, rewards/penalties • Program management • Relationship/trust style • Business sponsor/champion

13. Alignment Criteria (Scope/Architecture) • Flexible transparent architecture • Emerging technology assessment • Standards • Ability to customize solutions • Ability to support enterprise wide business processes

14. Alignment Criteria (Skills) • Innovation entrepreneurship • Management style • Change readiness • Career mobility • Education and training • Social political environment

15. Realizing the Business Value of IT Investments • Importance • Amount at risk • Politically valuable • Necessary feedback for improving future IS delivery processes

16. AIAC Framework

18. Alignment Phase • Align Business-IT Strategy – Porter’s models, Resources – Competencies – Capabilities • Invest in complementary assets • Choose IT investment type

19. Involvement • Involve customers – internal and external • Identify metrics for tangible and intangible costs and benefits • Make the business case

20. Analysis • Establish analytics • Validate results • Interpret results

21. Communication • Make actionable steps • Communicate results • Institutionalize payoff analysis

22. Concluding Themes • IT payoffs are the responsibility of the entire organization, not just the IT department • Management of IT payoffs begins prior to investment and continues through post-implementation • IT payoffs are contingent on creating and exploiting complementary assets