Hopefully you did not get stuck in the “trap” of Stage 2 and now find yourself in the third stage of IT maturity, the “Operational Enhancement” phase. If not, stay committed. Stage 3 is not easy to reach, but it is where you see real value. Here, IT initiatives are a crucial part of your business, and they provide measurable ROI for you.
Read on for the facts that you must know about Stage 3, as well as when to set your sights on Stage 4.
Why Do Companies Stay in Stage 3?
One reason companies may remain in Stage 3 is that this stage provides very clear ROI and business value from your IT enhancements. There is real value in Stage 3 and many may choose to stay in Stage 3. Another is that IT efforts become aligned with business strategy, making these strategies simple to execute and goals easier to achieve. (This could include implementing better scalability, improving net profit, enhancing customer relations/experiences, and becoming more competitive in your field.) IT Governance (how decisions are made for the business) are more complex, but critical to have mechanisms in place for the business to engage in the process. n Stage 3, similarly to Stage 2, it is easy to become complacent as IT becomes more central to your organization.
How Do You Know if You Are in Stage 3?
A good sign that you are in Stage 3 is when you see that resources and focus are shifted away from IT management and maintenance tasks and more toward strategic initiatives. These initiatives provide a clear, defined ROI for the business. Terminology and metrics that are measured, are much more business focused and address the value the business expects from the IT investment.
Stage 3 is when you find that measuring the cost of technology against business-related KPIs, such as your number of employees or revenue per employee, makes more sense than simply analyzing IT cost as a percentage of your overall budget. This is the point where IT budgeting transforms, and overall spend is no longer the primary measurement of your IT budget’s success. As you implement more successful IT strategies and tools that increase productivity, the overall amount spent per employee should decrease. While budgets in this phase are higher than in Stage 2, the additional spend likely has a very well-defined ROI.
Finally, Stage 3 companies use technology specifically to create a competitive advantage. They are no longer playing catch-up, but are comfortable with using IT as an integral part of their business model.
What Are the Downsides of Stage 3?
Sometimes, automation and implementing more efficiency becomes the driver of IT initiatives for Stage 3 companies, instead of their actual ROI. Implementing technology simply for the sake of having it is not a recipe for success; you must make sure that each initiative is properly vetted, that its role is defined, and that measureable KPIs are in place to determine its effectiveness. Always know the business value of the goal that has been set.
As you might expect, Stage 3 is more costly than Stage 1 or 2. Although there is a definable return associated with IT tools and initiatives, this will still impact cash flow and must be budgeted for accordingly. At some point, Stage 3 initiatives may have diminishing returns, so it’s important to always make sure your KPIs are measurable business drivers.
Another downside of Stage 3 is that many new IT projects will require external consultants and resources, which add another layer of cost and complexity to managing projects. Additionally, most of these new initiatives will require more employee training and buy-in to ensure widespread success. This means that companies in Stage 3 need to allocate a lot of time to developing the proper change management processes and will benefit from a culture that is open to new opportunities to improve. Traditionalists or hold-outs within the business could also negatively impact the effectiveness of new initiatives at this stage, and they will certainly limit you from moving to Stage 4.
How Do You Know when It’s Time to Move on?
To a certain extent companies will always have some Stage 3 activities, but you’ll know you are ready to progress to Stage 4 when the processes to roll out IT changes become second nature and the remaining Stage 3 changes stop providing justifiable returns. In some ways, by being really good at Stage 3, specifically with how investment decisions are made, the natural evolution is a move to Stage 4.
Keep in mind that the list of IT changes is always a living list, meaning that items will continuously be added to it in Stage 3 and beyond. It may also reveal new returns as your technology continues to mature in other areas.
How Do I Begin to Transition to Stage 4?
At Stage 4, technology is integrated with business practices and success so completely that there is no easy way to have a separate budget for technology. Transitioning to Stage 4 typically means throwing away your technology budget and creating an all-inclusive one, based on how individuals and departments in the business use technology.
Moving forward, technology trends will shape your products, so it will be essential to integrate those trends into product development as radical technology shifts impact almost every industry. These broad considerations should impact your strategic plan just as much as technology trends within your industry.
Looking even further ahead, it will be to your advantage to accept the notion that you may have a totally different business in 10 years as technology continues to evolve and enter everyday life in unexpected ways. (Think how Apple and Pandora have transformed how we listen to music, or how Amazon completely changed the way that books are published and sold today.) To remain at the forefront of your industry or to possibly become one of the big game-changers, it is essential to stay up-to-date with technology, continue to look ahead, and embrace Stage 4 of IT maturity.