Alignment in the 21st Century:Alignment in the 21st Century:Balancing Innovation andBalancing Innovation and

ImplementationImplementation

Professor N. VenkatramanBoston University School of Management

SAP Users Group @ MaastrichtApril 20, 2007

(c) Venkatraman, 2007 2

Imagine life without……

(c) Venkatraman, 2007 3

Yet.. there are conflicting views on therole and value of IT…

“expensive.. But necessary evil” “Am I getting value from IT investments?” “Are we investing in the right areas?” “Can IT become my core competence?” “Why not outsource and offshore?” “I see my competitors using IT strategically..” “I know that IT will become more central in the

future… but I do not know how to extract value”

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My Agenda

Alignment in the 21st century:Innovation and Implementation

IT Strategy 2.0

Reframing the Business--ITConversation

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New Excitement.. circa 2007

CIO as the Chief Innovation Officer!

I.T contributing to Revenue and Growth

From Business Process Reengineering toCrafting Business Model Innovations

Pervasiveness of I.T in products, processesand services

(c) Venkatraman, 2007 66© N. Venkatraman, 2006

Source: Bill Gates

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We see I.T everywhere now..

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A Car is a computer on wheels connectedto the network

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Software is shaping next generationbusiness processes..

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with new web functionality…

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We see convergence and overlapacross industries and markets

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Four conversation questions

1.How different will your business landscapebe in the next 3-5 years?

2.What’s the role of Innovation.. especiallybusiness model innovation for your futuresuccess?

3.Is I.T central to business modelinnovations?

4.How important is I.T to achieving yourcurrent business profitability?

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Alignment 1.0

ITITStrategyStrategy

BusinessBusinessStrategyStrategy

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We have captured value from IT

People Processes Technology

+ +

OO + IT = EOO

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Alignment 1.0 Mechanisms

Business process reengineering (massive scale) Decentralize and centralize (adapt over time) Standardize to reduce inefficiency Outsource and multi-source IT functionality Cross-functional global teams Service level agreements Business--IT partnerships

Etc…

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Alignment 1.0 Scorecard

BIf we are charitable..

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Alignment 2.0: The Network Era

Network Era

Client/Server Era

Mainframe Era

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We are in an era of global network

Live

ConsumePlay

Work Create

Connect

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And globalization of work and businessprocesses

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Innovation… The new focus?

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ProductsProcessesServicesPeople

My view on business model innovations

MooreMoore’’ssLawLaw

Bandwidth Bandwidth LawLaw

MetcalfMetcalf’’s s LawLaw

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Alignment 2.0:New Perspective, New Mandate

BusinessBusinessStrategyStrategy

I.T.I.T.StrategyStrategy

Drives

Shapes

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Alignment Agenda 2.0

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

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Alignment Agenda 1.0 focused onoperational, execution issues

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

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Alignment Agenda 2.0: BuildingBlocks (1)

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

CostCenter

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Cost Center

Best-in-class global sourcingpartners and vendors

Sourcing

Detached from businessoperations

Organization

Lowest delivered costbenchmarked against

external referent; not directlyconnected to strategy

Business Case

Best in class global ITinfrastructure

Focus

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Alignment Agenda 2.0: BuildingBlocks (2)

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

CostCenter

ProfitCenter

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Profit Center

Selective use of best-in-classglobal sourcing partners and

vendors

Sourcing

Embedded (and partnering) withbusiness operations

Organization

Contributions to customer valueand current profitability levels

Business Case

Support current businessoperations

Focus

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IT and Implementation Benefits

Data Information Knowledge Action Results} } } }

DesignGap

ExpertiseGap

ProcessGap

ExecutionGap

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Alignment Agenda 2.0: BuildingBlocks (3)

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

CostCenter

ProfitCenter

GrowthCenter

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How to think about innovation?

MooreMoore’’ssLawLaw

BandwidthBandwidthLawLaw

MetcalfMetcalf’’ssLawLaw

BusinessBusinessModelModel

InnovationInnovation

Supporting the growth agenda

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Growth Center

Selective use of innovation networkpartners and vendors

Sourcing

Embedded within businessoperations—shared responsibility

Organization

Contributions of IT to businessmodel innovations

Business Case

Support future growth trajectoriesthrough new business model

innovations

Focus

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Alignment Agenda 2.0: BuildingBlocks (4)

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

CostCenter

ProfitCenter

GrowthCenter

InvestmentCenter

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What’s your experimentationequation?

Google’s equation is 70-20-10. What’s your equation?

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Investment Center

Selective use of innovation networkpartners and vendors

Sourcing

Decoupled from current operationsOrganization

Allowing for experimentation ofplausible business models

Business Case

Influence future growth trajectoriesthrough selective experimentation

Focus

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The building blocks have differentpersonalities…

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

CostCenter

ProfitCenter

GrowthCenter

InvestmentCenter

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These building blocks are also dynamic

StrategicStrategicFocusFocus

Leadership ResponsibilityLeadership Responsibility

Innovation

Implementation

Business IT/IS

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Where’s Your IT Capital Allocated?

What % for Innovation?

What % for Implementation?

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Where’s Your IT Core Competence?

IT Competence for Innovation?

IT Competence for Implementation?

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Where’s Your IT Sourcing focused?

IT Sourcing for Innovation?

IT Sourcing for Implementation?

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Where’s Your IT Mandate?

IT Mandate for Innovation?

IT Mandate for Implementation?

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What about IT Performance Metrics?

IT Performance Metrics for Innovation?

IT Performance Metrics for Implementation?

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There’s legacy ‘management’ problem

We say innovation.. But we manage ITfor implementation

We say future.. But we manage IT fortoday

We say shared business-IT responsibilitybut we blame IT for the problems

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Managing for the future with I.T.

Stra

tegy

Information

Technology

Leadership

No Businessinnovationwithout IT

Value creation fortoday andtomorrow

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Your Challenges

The impact of I.T will be more than everbefore Pervasive Fast changing Value potential

Management of IT is equally important Multiple roles within enterprises Leadership and strategy linkages

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Putting these ideas into action

Clarity of Mandate for IT throughmanagement workshops

Recognition of the four building blocksfor business innovation andimplementation

Reinforce joint business-IT responsibilityDevelop an IT Strategy 2.0 scorecard

Are you ready to take on theexpanded IT mandate to win??

Thank You Very Much