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Question: Does IT matter?
o Robert Solow: no evidence that IT made any difference to US productivity across the 80s and 90s
o Nicholas Carr: IT is an essential infrastructural element, like electricity or air-conditioning, but without any competitive advantage
IT really does matter
o Keystone: IT matters in mid-size firms because it enableso Profitable business growth o Scale – increases in the complexity of
business processes, organisation and business model.
Mid size enterprises power the UK economy
o Only 6% of UK companies are in the £10m - £250m turnover bracketo Yet they employ 30% of the British
workforceo And generate 20% of corporate profitso And grow at over 8% per annum
o Despite their performance, they are nearly invisible o They are usually lumped together with small
and micro enterprises which are very different from them in character and operation.
Understanding M companies
o M-focused research from the Institute of Chartered Accountants:o Taking the M out of SME – a research study
from the ICA and BDO Stoy Hayward
Seven differences – different ballpark?
Small business Medium business
Owner-managed Professional management
Micro-management of employees
Culture enables employee development
Informal processes Formal processes and structures
Short-term horizon Longer-term planning horizon
Low external input External input from professionals
Equity held by founder / family
Wider equity base
Small customer base Diversified customer base
Source: 2005 research by the Institute of Chartered Accountants and BDO Stoy Hayward
How IT is analysed makes a big difference
o The amount of money spent on IT is a poor indicator
o Keystone analysed what IT does in all major areas of a business:o Sales and marketingo Financeo Operationso Product developmento Supply chain managemento Human Resource Managemento Infrastructure
Scenario-based IT Scorecard
1. Sales Pipeline Mgmt.2. Proposal Development and
Management3. Relationship Management
Database4. “Big company” web
presence5. Customer self service6. Marketing & Campaign
Management7. Complete insight about my
customers
1. Easy period close 2. Effectively pay suppliers/
partners on time3. Automated and timely
collections4. Automated Payroll5. Online, integrated banking6. Taxes across products and
regions7. Automated corporate
governance8. Effective forecasting9. Complete insight about my
finances
1. Project Planning and Mgmt.2. Contract & Change Order
Mgmt.3. Time and Expense Reporting4. Resource Management5. Procurement and
Subcontractor Management6. Document Management and
Delivery7. Benefits & Administration
Mgmt.8. Performance & Incentives
Mgmt.
1. Easy to find information2. Easy to use information
1. A network ties all computers and devices together2. Easy access to the Internet3. Pervasive Security4. Mobile and remote access to information and processes
3. Easy to Communicate4. Easy to Coordinate Teamwork
5. Manage and Protect Data6. Manage and Configure Devices7. Update SW on all desktops
Sales/Marketing Finance & Administration Operations
Empowered Professionals
IT Infrastructure
Sample IT Scorecard for PrintForLess.com
Sales & Marketing
Overall Score
Finance
Operations
Empowered ProfessionalsIT Infrastructure
1999 200520% 73%
25% 75%
10% 60%
40% 67%
20% 83%
43% 86%
Proposition: larger firms can make better use of IT
2003 Revenue, $$Millions
Bottom 25%
2nd 25%
3rd 25%
Top 25% 21.36
23.59
23.52
19.43
Quartiles based on IT CapabilityOperating Margin
10.58
10.21
12.42
7.29
Employee Count
228
250
257
197
Proposit
ion not supporte
d by
the data
Proposition: spending more on IT gives you more capability
Bottom 25%
2nd 25%
3rd 25%
Top 25%
Quartiles based on IT Capability
IT Spend % Revenue
7.50
11.65
6.36
3.21
IT Dollars (K) Spent per Employee
7.02
10.97
5.82
3.17
# PC’s per Employee
0.990
1.122
0.979
0.997
Better IT Capability costs marginally more. Other factors increase the cost of IT significantly without providing better capabilities.
In all cases, roughly one PC to one employee
Proposit
ion not supporte
d by
the data
Multi-step / process-led IT works
Implementing the process changes in software and systems.
Identifying the specific process changes needed to drive each key business lever.
Business Strategy
A data-driven vision of how to use the key economic and competitive levers in your business to drive success.
?Business ProcessTechnology
Implementation
Multi-step / process-led IT works
o Formalised processes: easier to handle complexityo Streamlined operations: growth without headcount
increaseso Flexibility: take advantage of new opportunitieso Better decisions: visibility of critical business issues
Implementing the process changes in software and systems.
Identifying the specific process changes needed to drive each key business lever.
Business Strategy
A data-driven vision of how to use the key economic and competitive levers in your business to drive success.
Profitable Sales Growth
Ability to scale up the business at minimal incremental cost.
Business ProcessTechnology
Implementation
Applying the model to PrintForLess.com
Implementing the process changes in software and systems.
Identifying the specific process changes needed to drive each key business lever.
Business Strategy
A data-driven vision of how to use the key economic and competitive levers in your business to drive success.
Profitable Sales Growth
Ability to scale up the business at minimal incremental cost.
Business ProcessTechnology
Implementation
Implemented new order processing system and developed partner portal.
Expand effective capacity via partners:
• New work sorted for profit potential
• Lower profit work dispersed to partners.
Vision: Increasing capacity utilization through leveraging partners.
Business achieves utilization of 120% of capacity; dramatic increase in profitability.
PrintForLess.Com Example
Bottom Line
On a 100 point IT capability scale, 10 points of improved IT capability delivers 1.9% of compounded annual revenue growth
o Result applies to product and service companies
o Model works in US / Latin America / Europe surveys
M-scaled challenges
Challenge Process issueExec Talent Finding the right people to fit the right
processes
Growth strategy Identifying the levers for competitive differentiation and growth
Finance Financial strategies needed to deliver business goals
Technology Technology infrastructure and applications to formalise processes in organisation
External input Getting help from the right people to deal with these challenges
Regulatory impact Don’t forget that the government remains a key player in your business