SUIT- a methodology to discover the

Strategic Use of Information

Technologies Alfredo Barriga Founder Knoweldge.cl, Chile ABSTRACT Much has been written about the strategic value of ITs. Nicholas Carr’s polemic

paper “Does IT Matter” was widely supported as well as widely contested. Although the controversy has not ended, slowly a consensus is being built around that maybe ITs themselves might be considered a commodity, but the way they are used is not, and can definitively lead to a strategic advantage. But “lead” does not mean “guarantee”. Therefore, different approaches have been developed as to how to discover and assess the strategic uses of ITs in an organization.

This chapter shows one of such approaches. It has been used mainly in SMEs,

due to its simplicity. But the author also used it to design a Digital Agenda for the Chilean Government. This methodology uses SWOT analysis to determine how ITs can make organizations acquire strategic strengths, take advantage of opportunities, overcome weaknesses and avoid threats.

INTRODUCTION

IT Managers and Business Managers seem not to talk the same language. Business Managers know about business, but are not keen to understand I.T. – nor are they supposed to. CIOs know about IT but at times do not understand Business – nor were they prepared to. Entrepreneurs do not understand IT, and IT vendors do not talk in business language. ITs are considered by business managers – and many business academic as well - at most as an operative tool, which helps automate processes and reduce costs. Their potential as a business driver is underrated. Their use as a business model paradigm-changer is ignored. CIOs are seldom part of Strategic Planning groups.

Yet, ITs have been successfully used as a driver for change in business model,

specially as a means to increase overall intellectual productivity, as a tool to empower managers to take better business decisions, as a way to access vast new markets, as a platform to create knowledge value or to develop new sources of income. The issue is how to make all of that happen.

This chapter describes a methodology developed by the author as a business

manager and business consultant in his effort to understand ITs from a business – and

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not technical – perspective. The original name of the methodology in Spanish can be translated in English literarily as “Information Technologies for a Profitable Management of the Corporation”. It is an answer to the question of how to invest in ITs that make business sense – given the nature of the business, its Vision, Mission and Focus, its corporate values, its strategic objectives, its Business Theory. It intends to be a tool that can help both the IT management and the business management speak the same language. It was designed for Small and Medium Enterprises CEOs, whose IT savvy is near to ground zero. But it has been used and proven useful for bigger corporations as well as Governments. It was formulated in 1999, and has been improved over the years.

It is based on common sense, the one issue where IT managers and business

managers must coincide. It transforms ITs to business elements, at the same businesslike level as marketing, production, HR or supply chain. Once ITs are transformed into business elements, business rules apply much the same way as in any other area. It is plain simple.

The objective of this chapter is to describe the methodology and give examples

of its use.

Background

Of all the many papers and books that have been written regarding the increasing importance of IT in the economy, I want to point the attention to the very recent Mc Kinsey Global Institute Report “Disruptive Technologies: Advances that will transform life, business and the global economy” (May 2013), that analyses the impact of the 12 principal emerging technologies by 2025. These technologies will have an impact the size of, or greater than, the whole economy of the U.S. The four main technologies are ITs, and 4 more have to do directly or indirectly with ITs. The economic impact will be captured as consumer surplus, new revenue, and shifting of value pools between producers or from producers to consumers. The nature of work will change (Disruptive Technologies, page 15). The Internet of Things will allow businesses and public-sector organizations to manage assets, optimize performance, and create new business models (page 6). Cloud computing will also enable entirely new business models, including all kinds of pay-as-you-go service models (page 6).

There is, therefore, a growing correlation between IT applications and business

models. That is the main reason why Information Technologies can and must become a strategic asset in the 21st Century business, as we enter in the Knowledge Society and exit the Industrial Society. ITs are considered by many as commodities, with no value added for the organization (Carr, HBR, 2004). That statement may be literarily correct, but not semantically. The strategic value of ITs does not come from what ITs you provide your business with, but with why you buy them and therefore how you use them.

To illustrate this idea: typically a corporation will buy a World Class ERP (such as

SAP, JD Edwards, Oracle Financial or the sort) to cut costs and automate processes. That may or may not be considered as strategic. But if it is bought to redesign the

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Business Model, to create new business rules which may change the way things are done in a very innovative way, then the purchase and implementation is certainly a strategic action, instead of an operative action. The latter would read typically as “cut administrative costs and automate processes” while the former could be “redesign business rules to shorten business processes” or “redesign business processes to increase administrative productivity”. Corporations which have made business redesign when incorporating a World Class ERP have been able to create business value for the organization, to the extent that they have had an extra value in due diligence processes when demonstrating they had done a smart use of the ERP. Organizations which have been able to understand the real contribution of an ERP as a business redesign tool, have outpaced their competition. In the end, having a World ERP does not give a competitive edge. Using an ERP for business redesign does. It makes managers understand their business - and their job in the business - in a different way. It makes them focus in better business rules and in better decision making processes.

In order to ensure a strategic value of ITs, it is therefore of common sense that

ITs should be part of strategic analysis. If ITs will have a strategic value, then they must be considered in the design of the Corporate Strategy. Conversely, if they are not considered in the design of the Corporate Strategy, it should not be surprising that ITs do not contribute to the strategic goals and objectives of the Corporation. Therefore, they should also be considered when using strategic tools such as Balanced Scorecard or SWOT analysis.

It must be said that Balanced Scorecard analysis with ITs considered inside

exists. But ITs appear as a separate issue. That shows a misunderstanding of the strategic role of ITs. They should be in the intersection of the Balance Scorecard, as part of the strategic actions that can be done to achieve the strategic objectives. Likewise, some applications of ITs could be part of the strategic goals, such as e-commerce, but again, under titles such as “capture new customers that we cannot get to with traditional distribution channels”.

Most times, ITs are looked upon as only an operational component with no

relation to a strategic contribution to the organization. That is why when designing the strategy, ITs are left out. They come in once the strategy is decided upon, as a tool to achieve strategic objectives which have been already defined. They are not considered to build a strategy around them. Therefore, strategic innovations such as changing business models with the use of ITs are left out.

Why does this happen? Business Chief Officers (CEO, COO, CSO mainly) have

little or no “IT savvy”, and CIOs have little or no Business savvy. Therefore, it becomes difficult for Business Chief Officers to understand how a Corporation’s Business Model can be changed by using ITs, as much as it becomes difficult for CIOs to contribute with a new business model using ITs. And it is in Business Models where ITs are most able to make a significant strategic contribution, such as with Business Process Outsourcing, Electronic Commerce, Electronic Business, e-procurement, etc.

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The strategic value of ITs has become a business issue. Stanford University’s Graduate School of Business is giving a Program, scheduled for April 2014, in that same matter, which’s objective is for “CIOs, CTOs, and senior general managers learn to identify, assess, and communicate the strategic competitive advantages enabled by information technology”

Having described the importance of counting with a methodology to use ITs as a

strategic asset in the organization, it is curious to find out that there is little written about the issue. There is some literature on the strategic use of ITs, but it is focused either from the point of view of IT department (how to manage an existing portfolio of IT strategic projects), or from the perspective of ITs themselves (how to identify strategic IT projects). A link is missing between the business side and the IT side: something that helps to determine which IT projects have business sense and are aligned with the organization’s strategy.

King and Teoi (Facilitators and inhibitors for the strategic use of information

technology, Kartz Graduate School of Business, University of Pennsylvania, 1994) conducted an empirical study to determine key factors that facilitate and inhibit the development of strategic applications of information technology (IT) in business firms. They found that differences in perceptions exist between firms that have used IT applications for strategic purposes and companies that have not. Generally, factors internal to the organization and those that reflect perceived needs play a stronger facilitating role than external factors for both groups of firms. However, “Perceived Needs” play a stronger facilitating role for those that have utilized strategic applications. “Internal Factors” play the strongest inhibiting role for both groups. Firms that utilized strategic applications place more emphasis on IT-related issues as important facilitators. Firms that have not done so place more emphasis on management issues. This work, nonetheless, did not give a framework to determine which ITs can have a strategic impact on the organization and how, but focused on the use of information for strategic purposes and the importance of information as a strategic priority. Moreover, as it describes what corporations do, it does not incorporate what corporations should do. External factors such as innovative uses of ITs should lead in many instances to strategic business projects with that use. For example, a newspaper confronted to the increasing use of tablets and digital media as the predominant way to issue contents, instead of paper. Or a digital camera manufacturer confronted with the increasing use of smartphones as the main device to take pictures (and short videos).

Mc Nurlin, Sprague & Buiii (2008) show 80 real company cases on how ITs were

used, and dedicates two chapters of the book to Strategic uses of Information Technology (Chapter 3) and Strategic Informations Systems Planning (Chapter 4). For these authors, “strategic uses of IT means having significant, long term impact on a firm’s growth rate, industry and revenue”. But, the book goes on to look at the business side of IT from IT point of view, hence it writes about designing corporate architecture (something a business manager will hardly understand), and managing different categories of ITs. Using the paradigms that the Internet has brought, it describes three categories of ITs from a business point of view: those which are a product of working

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inward (Business to employee), those which are a product of working outward (Business to consumer) and those who are the product of working across (Business to Business). So there is no given methodology to discover what can ITs do for strategic business goals or how it can contribute with business goals itself. Yet, the business examples that are given illustrate a business manager the “what” and “how” of the use of ITs, and that is a contribution to the strategic use of ITs, in that the business manager can better understand the strategic impact of the most popular ITs.

Mc Dowell & Simon (In Search of Business Value, SelectBooks, 2004) describe

various real cases where the smart use of ITs have meant a significant value creation and strategic edge for several organizations in the US, UK and Mexico. In one of these cases, it shows a template used to obtain credible project proposals and/or business cases for all planned and existing applications, which was used by business leaders as their outline in preparing requests for IT projects. But this was done for projects which already had been decided upon, and therefore there was no prior strategic identification of ITs, though the project itself might have been deemed strategic.

A more comprehensive approach is seen in Curley (Managing Information

Technology for Business Value, Intel Press, 2004), who shows a methodology for managing IT projects taken from Intel itself. Here we have a strategic approach, but from the IT side, stating that IT projects should be aligned with the Business, and provides tools to make that alignment happen. Yet again, the methodology is done over IT projects which are in the portfolio, with no regards to the process that put them there. It is a very good contribution for a CIO to have a smart management of the IT portfolio, and certainly gives some hints on how ITs can produce strategic projects on their own, but without providing a methodology to make that happen. And, it is done from IT side, not from business.

As well as there is literature that links IT with corporate strategy, there is also

literature which states there is no strategic value in ITs, which are seen simply as a business tool that, once the adoption curve has been fulfilled, becomes a commodity. Of these, the most renowned is the already commented paper of Carr. Bottom line, Carr says that strategic advantage using IT may only be taken by smart early adopters, but once the application is widely used, that advantage is wiped by late adopters, and the technology becomes a commodity. There are two refuting arguments to this position:

1) Becoming an early adopter of IT, if it gives a strategic advantage, might become a strategy in itself, and therefore, the smart early adoption of IT becomes strategic, making Carr’s theory wrong

2) The strategic issue is not only in using the technology, but in a smart use. Even a late adopter can take a strategic advantage with a smarter use of IT than the competitors – even if they are early adopters.

MAKING IT STRATEGIC

Here’s a simple idea to make an IT strategic from a business point of view: it has to become strategic from the business side. The flaw in all the options described above is that the strategic process is focused IT-wise, not business-wise. That means that in

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the best of scenarios, IT people will see that the IT projects fit with the corporate strategy, which is cool, but does not provide the strategic edge that IT can give to the business. It is not the same to make sure that any IT project undertaken does not contradict the strategy that has been previously developed for the organization, than to consider IT when doing the strategy. It is not the same to see business through IT glasses than to see IT through business glasses. We think that the approaches described above see business through IT glasses. We believe that in order to make ITs strategic they must be viewed with business glasses. We think this distinction is a key issue, because it is what makes IT a business matter rather than a technical matter.

To make IT really strategic they must therefore be part of the strategy when the

strategy is being discussed. IT can help to achieve part of the strategy of the organization, as a tool to facilitate the said achievement. Or, the way ITs are used may become a strategy in itself. Doing this analysis while the strategy is being developed, or doing this analysis after the strategy has been done is the subtle difference which makes an organization bring up the real strategic potential value of IT. By doing it while the strategy is being designed we assure that whatever use we do of IT, it will have a strategic value. It is just plain common sense.

The strategic value of ITs

Therefore, the clue to making an IT strategic, is finding the strategic value of that IT. A list of strategic values of IT will always be incomplete, since every day there are new ITs or new ways to use existing IT. But whatever the case, the strategic questions that must be made regarding IT remain more or less the same:

1. Can you change the business model using IT?

During the High Level meeting of the OECD on the Future of the Internet Economy that took place in June 2011 in Paris, it was vastly discussed the important contribution of the Internet in changing business models in different sectors of the economy. Telecommunications, music, retail, banking, financial services, insurance policies, publishing, tourism, newspapers, photography… virtually every industry in the world has been affected somehow by the Internet, and the most dramatic changes have happened in the business models. Lately education, with the emergence of MOOCs will certainly change the business model in ways which are not foreseeable at the moment of writing this book.

Business Process Management and ERPs can also contribute to create new business models by integrating and expanding the corporation with its supply and distribution channels, working seamlessly as one company, and by creating Business Intelligence which can highlight the pools of value creation.

Business Process Outsourcing is in itself an IT-driven business model that is allocating intangible capital in a global basis, incorporating it in the creation of value of the organization. And the outsourcing does not refer only to day to day basic operations in the corporation such as after sales services or supply chain. It extends from research and development to sub contracting of engineering, architectural o legal services in a per-project basis.

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2. Can you reach new markets using IT? The Internet has created the most dynamic

economy in the world, growing at two digits ever since it began, having surpassed the GDP of countries such as Canada, creating 2.6 jobs for each one it destroys, and with commerce over 8 trillion dollars in 2010iii. Currently 2 billion people have access to the Internet, and by 2025 3 billion more will add upiv. This will create the biggest market ever. E-Commerce is no longer an option, it is a must. Besides, the costs of global expansion using the Internet are far cheaper than with the traditional way. All you need to cover is the logistics and the after sales services, if the product or service is a tangible one. Otherwise, it can be done online. As the knowledge economy unravels, each day more products and services are dematerialized.

3. Can you make your organization a more efficient one using IT? The factory was the tool to make manufacturing more efficient. It was the icon of the industrial revolution and the Industrial Society. ITs are to the Knowledge Society what the factory was to the Industrial Society, making processes and intellectual capital more efficient. Especially, Business Process Management tools (BPM). Having the right information at the right time for the right people in the organization has long ago become strategic. Making data mining in processes using BPM can tell which employees are better suited for which tasks, and therefore can lead to a significant increase in intellectual productivity. Being able to put everyone to work where he or she is most talented and likes best working is a strategic project in any organization of the 21st Century, and ITs are essential to succeed.

4. Can you make disruptive innovations using IT? Innovation is paramount in the 21st Century economy. Creating an innovative environment becomes strategic. Creating a virtual space where people can gather and discuss good ideas helps to create that environment. Using the Internet for crowdsourcing – placing a challenge to all who may be interested and rewarding the most innovative solution – has become a new paradigm for innovation.

5. Can you improve customer experience using IT? As the “Internet of things” and IPv6 unravels, almost anything will be connected to the Internet, providing information on how people use products and how the customer experience can be improved. As customer become more sophisticated and demanding, such uses of IPv6 will become part of the product strategy. In addition, internet-based contact centers and social networks are also helping to improve the customer value creation and the value perception of products and services. Finally, e-commerce has a definitive advantage over traditional commerce: it identifies each customer, and is able therefore to give to each what each wants most – even if they don´t know it. Ideas like i-genius from Apple that incorporates a smart algorithm which is able to understand what music you like and offer it to you is a clear example on how IT can not only improve customer satisfaction, but create and improve a customized customer value proposition. New and unthought-of marketing strategies may well be created with emerging technologies such as IPv6 and Mobile Internet.

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6. Can you cut manufacturing costs using IT? One of the first killer applications for businesses provided by IT was MRP (Materials Requirement Programming). Lately the optimization of manufacturing plans is covered in most of the big ERP. Just-in-time paradigm is been funneled as well with ERP applications. But the biggest impact is coming from a different source, as smart manufacturing machines with IT embedded are making it possible to transform labor work-intensive companies into capital-intensive companies, reducing time to market and introducing bigger flexibility in manufacturing, which allows better response to a changing demand.

7. Can you cut logistic costs using IT? Thomas Friedman, in his best seller “The World

is Flat” names “insourcing” as one of the 10 “flatteners”, and describes how some logistic operators such as UPS is able to take care of the distribution of goods of the manufacturing company from the inside, thanks in great part to the digital platform that allows them to deal with information across the value cycle.

8. Can IT help you to discover and develop talent within the organization? Business

Administration and Economic Sciences have been able to solve much of the challenges that deal with the optimization of tangible resources like capital, factories or transportation. But it has not been good at optimizing intangible resources such as talent, creativity or soft working skills. What would the productivity of your organization be if everyone was working where most talented and most passionate? Undiscovered talent must be the biggest waste of intangible capital the modern organization has. Workflows or BPMs, if used properly, may give great information regarding what people are good at, therefore discovering talent – as was described above. Internal crowdsourcing can also help discover people who otherwise would never have had the opportunity to show their talent.

9. Can IT improve employee performance? Although it has been around for a long

time, and although it has followers and detractors, teleworking (also known as telecommuting) has been a strategic decision in many big companies and there is empirical evidence that it increases employee productivity and job performance, but not always. Some employees in fact lower their productivity since they cannot separate work from family when they are home. Successful cases show teleworking goes always hand in hand with the traditional work at premises, giving teleworking one or two days of the week. Employer costs also drop. The Institute of the Future wrote a paper describing the work skills that will be needed by 2020 workersv. Social technologies will drive new forms of production and value creation. With a massive increase in sensors and processing power, the world will turn into a programmable system. Both drivers will need design mindset as a skill for workers. IT is the tool to acquire much of that skill. Social technologies in a globally-connected world will create value added with virtual collaboration (that runs over the Web). New media ecology with new communication tools will require new media literacy beyond text. IT savvy in the use of these tools will become a strategic issue, and training employees in those skills will certainly become strategic.

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10. Can you achieve strengths you don´t have by using IT? Take branding. Thanks to the Internet, now you may aim at building “digital prestige” and it doesn´t cost a fortune. Knowing how search engines work, how social media works, how bloggers work, will help to make an organization well known where it needs to be well known – amongst its stakeholders.

11. Can IT help to overcome weaknesses? Most weaknesses in organizations today

have to deal with poor communication inside the organization and poor business information. Both are dealt by IT. Intranets, corporate mail, and corporate wikis can be great tools for communication, but also Business Process Management (BPM) tools must be considered, since they carry the communication along the process, and are meant to provide and ask whatever information is needed at any given milestone or task of the process. ERP also deal with business information in a holistic, integrated way, and if they use business rules, they will put the information at the finger of who needs it, when needed and for what is needed.

12. Can IT help to take advantage of opportunities? The Web is a world of opportunities,

as said before. Taking advantage of them means to understand the market as global, and customers as singular but attractable in a one-to-one basis. Social Media help to uncover hidden opportunities by listening to what the market’s buzz is about. Business to Business (B2B) portals and marketplaces have thousands of opportunities to sell or buy products from other countries, like alibaba.com (mainly Chinese suppliers). The Internet allows to take advantage of business process outsourcing that otherwise would be impossible, like the radiology diagnosis made by radiologists in Bangalore, India, for U.S. patients, or the global support center Experian, a credit reporting agency that gives services to Banks and financial institutions, has in Santiago, Chile.

13. Can IT help to avoid threats? IT can create threats as much as help to avoid them.

Disintermediation can happen through the Web, but understanding where the information worth value stands can help incumbent companies overcome such threats. A wholesaler which supplied mostly to small shops is threatened by the big retailers, which are killing the wholesalers’ base of clients. By using IT, he can create a small retailer chain that works a common brand, with well developed business processes and a common marketing. Or, it may transform the wholesale business into a retail business through the Web.

14. Are competitors, consumers, governments or other actors using ITs in a way that challenges the products and services our organization is delivering? We mentioned before how digital devices have posed a huge challenge in newspapers, or how smartphones are challenging traditional camera or video manufacturers. A huge portion of the economic impact in year 2025 predicted by Mc Kinsey in the aforementioned Paper on 12 disruptive technologies will come from pools of value which will go from incumbent corporations towards consumers or new challengers. Therefore, ITs in themselves will have a strategic impact in the organization. Denial of such dynamics may have unpleasant consequences, as Kodak can testify.

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Anyhow, whatever the way these emerging technologies may affect the Organization; they will in the end refer to one or several of the first nine categories of this list.

The strategic value of IT derives from the use it is given and the impact of that

use. Finding IT killer applications for the business makes IT have strategic value. In the next table there is a list of some business IT, its uses and some typically

killer applications:

Tecnology Uses Killer applications

BPM (Business Process Management) / Workflow

Business Processes, Business Process Outsourcing, Quality Assurance

Improve employee performance in processes; identify who is better for what

ERP (Enterprise Resource Planning)

Corporate management

Optimize corporate resources, establish best practices, make business models more efficient

Cloud Computing Outsourcing of digital platforms

Reduction of IT Total Cost of Operation (TCO), improvement in IRR of IT Projects, improvement of efficiency in use of IT resources, improvement of IT safety

Social Networks Marketing Listen to customers, improve corporate prestige, incorporate customers in product design

e-Commerce Marketing Access to wider markets; bigger knowledge of customers

Big Data Business Intelligence In-depth Business analysis, establishing correlations that help spot business trends, determine quality of search, improve decision making

Internet Crowdsourcing, e-procurement, teleworking Lilfelong trainning, insourcing, Contact Center, Internet of things

Innovation, improvement of supply chain, reduction of purchasing costs, reduction of overall costs; access to world talent; variabilization of human resources costs,

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Tecnology Uses Killer applications

access to premium information, multichannel contact with customers, development of smart products that share information (IpV6)

e-mail Corporate communication

Less meetings, improvement of corporate communications

CRM (Customer Relationship Management)

Marketing & Sales Improvement of customer attention

Aligning IT and business strategy

The methodology that is discussed in this chapter addresses the challenge to

find out which ITs, and used in what way, are the ones that can give a strategic value to the corporation. This can be done from two approaches: i) help achieve the strategy and the strategic goals that have been planed, and ii) come up with new strategies which are IT driven (i.e. killer applications of ITs applicable to the Organization or IT based challengers to products and services of the Organization). The first approach is easier for those who know what each IT is used for. You can then identify which ITs are best suited to achieve each strategy and each strategic goal, and say why is that so, and how would you have to use the IT to help with the strategy or the goal. The second approach requires more IT and business savvy, in equal proportions. It means you can come up with an IT-based strategy to acquire or increase strengths, seize business opportunities, overcome weaknesses or avoid threats. It means you are able to identify emerging ITs or new uses of existing ITs which will impact your Organization. The first approach is about looking at the IT of the business, and contribute to make the business strategy better. The second approach is about looking at the business that IT may provide. In the end, by doing the analysis both ways you come to ITs that align with strategic business goals.

The ITs that fit with the strategy define what we name the “IT profile” of the

organization, that is, the list of ITs which have a strategic meaning, stating why and how they will be used. The next thing to do is to identify which are the IT projects that must be undertaken, given this IT profile, and in which order. And finally, these projects must be presented in a businesslike way indicating which strategic issues or goals each one of them addresses.

We have named this methodology Strategic Use of Information Technologies

(SUIT). To come up with a list of strategic issues where ITs can have a saying: 1) They can be taken from strategic goals already defined,

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2) They can be taken from breaking each strategy into several issues which are needed to achieve it, or

3) They can come out from a SWOT analysis of the organization. Perhaps the outcome of this third way may not be what you would call “strategic”, since many weaknesses, for example, are not strategic, yet they need to be acknowledged and overcome. But this approach ensures any IT project has a business reason behind it, which deals with strengths, weaknesses, opportunities and threats. Inside threats and opportunities you must consider the emerging technologies and how they will impact your organization.

A simple spreadsheet suffices to make this exercise. The first column will have the list of strategic issues. For each issue identified a question must be answered: what can IT do for this?

A column in the spreadsheet is used for each IT identified, and in the intersection of the issue and the IT a phrase is entered containing a simple tag with the “what & why”. For example, if the issue is to develop a new direct contact & sales channel with the consumers, we would have a column with “E-Commerce” and in the intersection with the issue row we could write something like “Web Storefront to acquire new customers”.

The outcome of this exercise is a grill with all issues identified and all IT involved

that we named “Information Technology Profile of the Company” (IT Profile), and it could look like the following table:

Table 1: Defining the IT profile of the Organization

ISSUES ERP INTERNET CLOUD COMPUTING SOCIAL NETWORKS LOGISTIC IT

1 Enhance direct contact with local

customers

CRM Module Contact Center with

chat, mail & phone

thru Skype

Hosting for Website Facebook Page

2 Reduce inventory costs in

distribution channel (optimize

inventory in lorries)

inventory control of

lorries, sales through

PDA devices

PDA connection

through 3G

Implement WMS with

RFID, PDAs & mobile

printers

3 Diversify suppliers e-procurement

module

B2B marketplaces

4 Reduce sales bussines cycle BPM connected with

Sales module

Crowdsource new

algorythm for demand

forecasting

5 Increase administrative

productivity

BPM connected with

ERP to determine best

suited employees for

different tasks

Introduce Teleworking

for at least 30% of

staff at least one day

per week

Create virtual space

per employee

Create corporate wiki

to funnel good ideas

6 Global expansion of business,

selling directly to consumers

e-sales Module

connected with

inventories & Website

plus after sales

technical support BPM

Transactional Website

for B2C

Hosting for Website Facebook Page per

each country,

advertising campaigns

7 Incorporate customers in product

design

Facebook page

8 Reorganize business focused in

customer segmentation

Business Intelligence

module for

segmentation

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If inside the IT department there are leaders per IT, they would be the counterpart of the business side in the IT projects of their expertise. This would be the criteria to create columns, though there might be more than one column per expert.

All issues named in the list must at least have one IT connected. If there is none,

that issue must be removed, since there is nothing where IT can help (strategic as it may be).

Once the “what” and “why” is identified, the next step is the “how”. Trying to make

just one “Mega IT Project” is not a good idea. Better to identify small steps that, according to issues such as the IT savvy of the organization, its culture and the fast results, may end in a “Plan of I.T. Incorporation” (hereunto referred as PITI) by which a virtuous circle is created. Therefore, the PITI will be materialized by many IT projects that help the Organization understand, use correctly, and create value for them by using IT.

For example, in an organization where there is very little IT culture, perhaps

Project #1 will be to give all an e-mail and change the way by which certain things are communicated (starting with the CEO): “do not ask me for a meeting to discuss it; send me an e-mail with your proposal, and let us contrast ideas through this media. Meetings are to decide; e-mails are to deliberate”. This way in which the organization uses IT will result in less time spent in meetings, a clear track of ideas discussed upon a certain matter, a more careful way to express ideas (what you say is gone with the wind; what you write is written on a wall) and a growth in the ability to communicate skills by all people involved. The overall performance of employees will improve. And learning how to use e-mail is easy.

In the same manner that all issues must have at least one IT connected, all IT

identified in the IT Profile must be in one project at least. Once this is achieved, the deliverable is a Plan of IT incorporation that meets the exact issues by which we want to use IT. There we close the analysis cycle in this Methodology.

A project can be defined attending a business objective, or it may consist of

introducing a new IT which is complex, not from the technical point of view, but from the cultural point of view, meaning it will change working habits. Inside as we may be in the IT era, it is still hard for non IT people to acknowledge the use of more than one IT at the time. It can be done when the new IT is incremental, that is, it is an IT built on previous IT already being used, or at least a related IT.

Therefore, a project may have more than one IT inside when there is previous

use of IT. In this case the IT leader must be able to coordinate the efforts of the different specialists.

The PITI could look as in the following Table:

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Table 2: defining IT Projects

The priorities are business-driven. The projects are business projects with IT

inside. This is a different approach to ITs as compared with what you see around. In the example above, the first priority was decided upon creating tighter bonds with existing customers in the local market. The corporation already uses the Internet and has a website – only for local market. But it did not have a direct channel with end customers. The technology needed around this issue is simple, as well as the time to learn how to use it. The cost is low, the impact high. So, from both a business point of view and an IT point of view, it is a good start. People still have an emotional and many times irrational relationship with IT: they like them or they dislike them. When ITs are really easy to use and a great answer to a need, they are liked. When they are difficult to use and/or the benefits of using them are not clearly apparent, they are disliked. So if the plan is to introduce a set of IT projects, a good strategy - as stated above - is to begin with a project that is easy to develop, easy to use and has a big impact. When people have good experience with IT, they want more. When they have a bad experience, they become frustrated and, since their job is IT dependant, they become fearful. The outcome is a worsening of productivity.

The results of the actions undertaken within each project will serve as an input to

monitor how well the organization is doing in the smart use of ITs; which ITs are better understood and applied, where Strengths built in generating value are using ITs. When this is done over and over within the Organization, ITs begin to be a real support to value creation and knowledge-based development of the Corporation, since it develops the necessary skills to identify which IT are the better ones fit for the Corporate objectives, culture and competitiveness.

We have applied this methodology in Classes with business cases using the

same Business Case for different students. In the overall math, the Technical Profile was more or less the same, but the Projects designed were different. This is because each one “felt” the Corporation in his own way, giving more importance to this or that issue.

PROJECT 1: ENHANCE

CONTACT WITH LOCAL

CUSTOMERS

PROJECT 2: DIVERSIFY

SUPPLIERS

PROJECT 3: REDUCE

INVENTORY COSTS IN

LORRIES

PROJECT 4: Make

processes efficient

and increase people

cooperation

PROJECT 5: CHANGE

WORK PARADIGM

PROJECT 6: GO

GLOBAL

PROJECT 7: MAKE

CORPORATION

CUSTOMER-CENTRIC

CRM Module e-procurement

module

inventory control of

lorries, sales through

PDA devices

BPM connected with

Sales module

Introduce Teleworking

for at least 30% of

staff at least one day

per week

e-sales Module

connected with

inventories & Website

plus after sales

technical support BPM

Business Intelligence

module for

segmentation

Contact Center with

chat, mail & phone

thru Skype

B2B marketplaces PDA connection

through 3G

BPM connected with

ERP to determine best

suited employees for

different tasks

Create virtual space

per employee

Transactional Website

for B2C

Hosting for Website Implement WMS with

RFID, PDAs & mobile

printers

Crowdsource new

algorythm for demand

forecasting

Create corporate wiki

to funnel good ideas

Hosting for Website

Facebook Page Facebook Page per

each country,

advertising campaigns

15

SUIT becomes therefore a tailor-made suit tool for business managers that want

to incorporate IT to their organizations according to their corporate needs. Therefore, business itself becomes the main driver for IT rather than the other way around, and businessmen understand this language.

Addressing the right issues

Practice in the use of SUIT has shown that SWOT is a good tool to deliver

issues, but not the only one. Balanced Scorecard techniques may also be helpful, since they deliver measurable targets within the Strategic Plan.

Anyhow, ITs are a powerful strategic tool to help acquire strengths, take

advantage of opportunities, surpass weaknesses and avoid threats. It also helps to develop a good Customer Value Proposition, materialize a Vision of the Corporation, and accomplish the Corporate Mission. They definitively have something to say when it comes to the “how” of things, especially when the “how” deals with creating, delivering, distributing or mining knowledge that is useful for the organization. In the heart of processes there is IT to be counted on: Workflow, BI, ERP and the like are IT that help to the development of know-how.

Therefore, to produce the right issues for SUIT methodology an Organization

needs to have a Strategic Planning tool, and a Strategic Plan that comes from the Strategic Analysis.

Once you have your Strategic planning tool, and you come to the issues this Plan

has delivered, in each issue the same question must be made: how can IT help here? If there is a “somehow”, then that issue becomes a part of SUIT.

SUIT methodology could also be used for any business decision, be it strategic

or not. The question is always the same: is this something that ITs can help to solve, or may give a value, or may support? When the answer is yes, then SUIT helps to give business value to any IT project.

As previously noted, ITs are not useful only in issues such as cost cutting and

process betterment. IT may contribute with business strategy as well, by answering the following two questions:

a) What other businesses may we develop using IT? Internet is a Sales Channel,

and more. It is the gateway to market intelligence, it tells you what does the market appreciate of you, it gives information on how customers perception of value varies through time, it tells you what is important now and here. IT for logistics may help you streamline your value cycle and add a new dimension to your actual business. IT for business processes may add up a completely new vision of your business and take you to new and more profitable roles in the value chain. And so forth…

16

In this approach, it becomes suitable to ask for whatever uses are being done or may be done with existing ITs or emerging ITs. Business lies underneath addressing correctly that question.

b) What business model may we adopt using IT that may become a competitive edge? IT are changing Business Models, because IT are a knowledge tool, and as such, they support new ways to do Business. Take Dell, and how it completely changed the value cycle of retail distribution of computers. It is the Business Model that gave Dell the competitive edge, based on IT. Not IT themselves. And it is the way they use IT within the Model that has kept “me too’s” out of sight. With a strong interaction between IT and Business Models, IT allow new Business Models to come true, and new Business Models strain the use of State-of-the-art IT. Likewise, they are a driver to conduct Industrial-based Corporations into becoming Knowledge-based Corporations.

Finding the right IT and the right use of IT

What makes IT a winner is the killer application. Each Organization must find its

own killer applications. IT is important to business managers as long as they are able to understand three business questions:

1. What is this IT used for? 2. How is it used? How it could be used? 3. How much does it cost? When reducing IT to answering these questions, any businessman will be able to

understand IT in business terms and make decisions on what to use, why for to use it and how to use it. It is therefore important for the CIO of the Organization, to be able to visualize which are the IT that align with the Business objectives and how can they be used. Then, the Business Manager will decide on how it must be used. The IT Profile will have all the “killer apps” the Corporation has for its particular needs.

Building the IT Incorporation Plan

IT incorporation must be good news to all the Organization. Management must

be the greatest fan of IT incorporation, but not the only one. All people in the Organization must go along in the process of incorporating IT to its work. For this to happen, it is necessary to:

a) Consider the IT culture of the Organization b) Make an internal Marketing Plan, stressing the opportunities and challenges for

the people in the Organization with the Plan for IT Incorporation (PITI) c) Show how, with the PITI, knowledge capital for each worker may be achieved.

This is the main benefit for people, since their contribution for the Organization is also a contribution to their own professional capabilities and professional career

17

d) Remember some people are not prepared to incorporate more than one IT at a time in their work. Apart from these cultural and marketing issues, there are two criteria to consider

the priorities in related to which Projects go first: 1) Technological priority, meaning that some projects need IT that must come

first, and they might become a project in themselves. The most basic case comes for a corporation with no IT infrastructure: the first project will be to provide that infrastructure. And the return on investment of this project will have to be shared between the projects it facilitates.

2) Economical priorities, according to the IRR or the NPV of the project. All IT projects must be economically evaluated. It might be at times very difficult to find the pay back of a project, but it must exist.

An IT Project that will be evaluated by Business Managers must be written in

business terms, and although technological aspects cannot be avoided, they must be explained in business terms as well. Projects defined in the PITI must make reference to the IT that match the Issues identified in SUIT. An IT Project can solve more than one business issue. To make the whole process coherent, the sum of IT projects must address all the issues raised in the initial analysis.

For each Project:

a) Put a name that has to do with the Business Goals you want to achieve, so as to make it closer to end users and beneficiaries of the Project

b) Specify the connection of the Project with the Strategic Issues it is helping to achieve, since that will be the driver of the Project

c) Clearly specify the deliverables the Project will have and the Success Criteria by which it should be measured.

d) Clearly specify the reach of the Project, stating i) what it includes and what it does not include, ii) who are the people in the organization involved and which is the impact on their workplace and on the contents of their work.

e) Specify the organization that will be needed to make the Project. The project must be lead by a business leader, to which the IT department acts as an internal “prime contractor”. The role of

f) Identify and explain the “entry barriers” that the Project has and how they will be addressed

g) Explain any other business risks the Project has and how they will be managed h) Describe your Internal Marketing Plan to make all the team in your Organization

“buy” the Project. i) Make and economic evaluation of the Project. If the project will bring lower costs

or bigger gross margin, or bigger sales, make a forecast in a spreadsheet and come out with financial figures such as IRR, NPV o Payback term.

18

CASE STUDY

HDA (1998) HDA is a Chilean Holding that works in the food retail industry, with more than 30

years of presence. It has a wholesale unit which sells to small neighborhood stores through all the country, but also to big supermarket chains. The latter refer to some products it buys directly from farmers and other products it imports through another business unit. It has its own chain of supermarkets and one Hypermarket. It has warehouses in the main cities where its customers are. Both the supermarket chain and the Hypermarket are directed to C2C3 segment of population, which is thought of as the highest growing segment.

There has been a negative evolution in the number of clients HDA has for its wholesale business, as the big supermarket chains are putin out of business the small neighborhood stores, though they still have over 20% of the market.

The warehouses are not well connected to share information, which is therefore centralized in the HQ.

The owner of HDA is convinced of the need to have prompt information of his business, but in the past each unit developed its own legacy system or bought one in the market, which would not be compatible with the rest. Therefore, he decided to invest in a World Class ERP, and contracted a friend who knows about ITs to lead the Project. Alas, the Project failed and year 2000 is at hand, with no solution implemented. This is a big threat, since the cashiers and POS machines in the supermarkets could work idly. While implementing the ERP they realized that the different units called differently the same things, and coded them with different structures.

HDA is run in a very autocratic way, with the owner having direct interference in decision making of managers depending on him. There is no planning activity. Business information comes late and is not reliable.

E-commerce is seen as an interesting channel, but up to that moment, all projects made in the country to introduce e-commerce in the supermarket industry have failed (“people want to see and touch what they buy to eat”). Institutional customers on the other hand, like Hospitals, the Army, or Hotels, could be a way of expanding the business that is been lost on the neighborhood stores.

The issues raised using SUIT were the following: 1) Clients of wholesale activity are dying. Can ITs help stop the trend? Can ITs

help the clients? Yes, it can. 2) There is an urgency: Y2K. It has become strategic! 3) Once the threat of Y2K has been overcome, HDS still needs an ERP to

manage the holding in a more accurate way. Accurate and fresh information is strategic 4) There is an opportunity in developing a channel to consumers via the Internet 5) There is an opportunity in developing the Institutional channel, which’s monthly

purchases, might be even higher than neighborhood stores 6) The big retail chains might disintermediate HDS and buy directly from HDS’s

suppliers

19

7) Optimization of supply and delivery chains is strategic to maintain competitiveness

The IT Profile that was built was as follows:

The projects defined were the following: Project 1: Get Y2K solved The only possible way out in 1998 for 2YK was to re code all programs, most of

which were written in COBOL. Buying another ERP and implementing it in such short time is too risky, even though it will have to be bought in order to cover other strategic needs.

Project 2: Create new B2C Channel Even though to have this completely running and optimized it will be necessary to

have an ERP and Logistics Software running, at least HDS can begin with an e-commerce store project which requires a transactional Web Site and the development of a logistic platform to deliver to home’s customers. This will enhance the logistic know how of HDS, developing a competitive edge that today it lacks.

Project 3: Improve logistics As a wholesaler, logistics is in the core of HDS business. It must therefore do

whatever it takes to optimize both the supply and delivery chains, using Warehouse Management Systems, RFID, Workflow (BPM) for procedures, Supply and Deliverable chain software, net connection between warehouses, and the Stock Module of an ERP – which by this time should already be decided upon and bought

Project 4: Develop Institutional Sales This project is intended to both increase sales by attending the Institutional

market and maintain sales to big supermarket chains, giving them a supply chain

HDA IT ProfileISSUES ERP INTERNET CONNECTIVITY LOGISTIC IT LEGACY SW

1 Neighborhood stores in decline Customize ERP for

franchise control

Connection to stores Supply chain

optimization

2 Y2K with ERP not implemented Remake Code

3 Dispersed information, not

suitable to decision making

New ERP, correctly

bought &

implemented

4 Develop new channel to

consumers, delivery through

franchise

e-Commerce module e-commerce store Delivery chain

optimization

5 Institutional market opportunity Sales Module with

workflow

B2B Platform Delivery chain

optimization

6 Big retail chains might

disintermediate HDA

Sales Module with

workflow

B2B Platform Delivery chain

optimization

7 Optimization of logistics is clue to

competitiveness

Stock Module Connection between

Warehouses, RFID

Warehouse

Management System,

RFID, Supply &

Delivery Optimization

8 Autocratic management Workflow for

procedures

Mail, Corporate

communication tool

20

outsourcing service. The Sales module of the ERP would be used. A B2B Internet platform can make the process lithe, and the Delivery Chain Software would help to optimize the service to the customers

Project 5: Institute Management Process The autocratic management of HDS might be strength in some instances, but for

modern Corporations, it becomes a nuisance. The owner must institutionalize the process of decision making, and to that end Workflows (BPM) is the suitable tool. The Project can start with the use of mail as the corporate communication tool, and then escalate it into workflow processes where deadlines are informed and controlled automatically.

Project 6: Implement the rest of the ERP This Project starts with the purchasing of the ERP, after a careful analysis of the

different suppliers, with emphasis in showing “happy customers” with a similar business than that of HDS. The modules that must be implemented, aside from the ones mentioned above are accounting, financial information, HR, and Asset management

Project 7: Neighborhood Store Franchise Since neighborhood stores are declining due to competition of big supermarkets,

why not compete back? Big chain supermarkets normally are in the suburbs, whereas neighborhood stores are nearby. They can offer a product basket limited to the most common everyday needs. HDS may connect these stores to its ERP, so as to manage their stock and generate reposition. HDS can take care of marketing and use its expertise in supermarkets for settling the layout of this franchise. HDS would then make an agreement with the franchisee, which would buy only from HDS in exchange of being part of the franchise. With the information produced with this project, HDS could know which are the everyday needs of each neighborhood, and therefore give a premium service to the neighbors. HDS would thus specialize in delivery of everyday groceries to neighboring places at a good price.

Each store in the franchise will be connected to the nearest Warehouse, and with

Logistics Software the optimization of the supply chain will be obtained. So the ITs involved are ERP, connectivity and Logistic IT

The 7 projects are not implemented in a linear way, but rather in an organic way.

That is, some of them start at the same time than others, but the main work is done once the others are in place. For example, buying the ERP is a process that can start immediately. It must be bought and understood once the e-commerce starts running with the storefront. Likewise, the delivery software – if it cannot be dealt by with the ERP – must also be ready for implementation once the storefront is running.

The Project list is the following:

21

For each Project a document will be done stating what are the goals, how it

complies with the SUIT analysis, what ITs will be necessary, how will they be used, which will be the costs, which will be the benefits, which will be the organization of the process, which are the risks. A Gantt or PERT would be most welcome.

CONCLUSION

SUIT is a very simple Methodology that creates a process within the organization to help the incorporation of those IT that make business sense, be it strategic or operative. It is a practical methodology rather than a model. It will stay as such since IT is a never-ending-to-evolve business tool, which from time to time (and each time faster) happens to appear with a new paradigm that affects businesses as they exist, or even whole industries as they exist.

With practice, SUIT helps non technological managers incorporate IT into their

managerial skills, vision, tasks and performance. It helps the organization to understand which IT and why are the best suitable for their strategic vision. It helps the people in an organization to undergo a process of IT adoption that is not traumatic. It finally helps to create a virtual circle by which IT drives knowledge creation and knowledge creation drives IT smart use, adding muscle to intellectual capital of both the organization and its employees. In the end, the entire organization is driven towards a knowledge organization.

REFERENCES Edited book: Curley, Martin (2004). Managing Information Technology for Business Value. Practical

Strategies for IT and Business Managers. Intel Press Mc Dowell, Robert & Simon, Willliam (2004). In Search of Business Value. Ensuring a

return on your Technology Investment. SelectBooks McNurlin, Sprague & Bui (2008). Information Systems Management in Practice. Prentice

Hall Web site: Disruptive Technologies: Advances that will transform life, business, and the global

economy. Mc Kinsey Global Institute. Retrieved October 27, 2013 from http://www.mckinsey.com/insights/business_technology/disruptive_technologies

PROJECT 1: GET OUT

OF Y2K TROUBLE

PROJECT 2: CREATE

NEW B2C CHANNEL

PROJECT 3: IMPROVE

LOGISTICS

PROJECT 4: DEVELOP

INSTITUTIONAL SALES

PROJECT 5: INSTITUTE

MANAGEMENT

PROCESSES

PROJECT 6:

IMPLEMENT REST OF

ERP

PROJECT 7: CREATE

FRANCHISE

Remake Code e-Commerce module Warehouse

Management System,

RFID

Sales Module with

workflow

Workflow for

procedures

New ERP, correctly

bought &

implemented

Customize ERP for

franchise control

e-commerce store Inventory Module B2B Platform Mail, Corporate

communication tool

Connection to stores

Delivery chain

optimization

Connection between

Warehouses, RFID

Delivery chain

optimization

Supply chain

optimization

Workflow for

procedures

Delivery chain

optimization

Supply chain

optimization

22

Facilitators and inhibitors for the strategic use of information technology. Information and Management, Karz Graduate School of Business, University of Pittsburgh. Retrieved October 21, 2013 from http://uwf.edu/rplatt/ISM-4300/facilitators.pdf

Internet Matters: The Net’s Sweeping Impact on Growth, Jobs, and Prosperity. Mc Kinsey Global Institute. Retrieved October 27, 2013 from http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters

The future of work skills. The Institute of the Future for the University of Phoenix Research Institute. Retrieved October 31, 2013 from http://www.iftf.org/uploads/media/SR-

1382A_UPRI_future_work_skills_sm.pdf

i http://uwf.edu/rplatt/ISM-4300/facilitators.pdf ii http://www.pearson.ch/HigherEducation/MISManagementInformation/1449/9780132437158/Information-Systems-

Management-United.aspx iii Internet Matters: The Net’s sweeping impact on growth, jobs, and prosperity, Mc Kinsey Global Institute, May 2010, in

http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters iv Disruptive technologies: Advances that will transform life, business, and the global economy, Mc Kinsey Global Institute,

May 2013, in http://www.mckinsey.com/insights/business_technology/disruptive_technologies v http://www.iftf.org/our-work/global-landscape/work/future-work-skills-2020/, summary in

http://www.iftf.org/uploads/media/IFTF_FutureWorkSkillsSummary_01.gif