It’s funny sometimes when I speak to a group about IT. On one hand, you have a large number of people that almost involuntarily roll their eyes, and on the other hand, you have a group with almost the exact opposite reaction. This disparity is almost always based on the value each group is either receiving from their current technology initiatives, or based on what they perceive — the value that IT capabilities can provide to the organization. So why is there such a huge difference? Why is it that some companies’ executive teams are pulling technology decisions into the boardroom, and some are refusing to even have the conversation? Why do some companies see IT as a necessary evil, and some view it as an invaluable resource?
As I mentioned above, the problem comes from either received or perceived value. You are either receiving measurable value from your IT initiatives, or you are not. Harvard Business Review refers to a similar two-group disparity as the haves and have-mores (they also suggest, and I agree, there are not many have-nots around anymore). The haves are using technology mostly to operate their businesses, where the have-mores are using digital capabilities far beyond the operational. As this post is exploring the difference in value between the same two sets of companies, we’ll share the terminology coined by the trio from McKinsey & Company in the article referenced above.
So what is the difference between the haves and the have-mores?
Differences between the haves and the have-mores:
IT is not associated to financial gain.
IT capabilities not only determine
the potential for financial gain,
but also control profit margin,
and overall net income.
The major difference here is the haves see IT as an expense, whereas have-mores view IT as a strategic investment to advance the business. Whether it’s product development, product delivery, or customer experience, IT investments are made for strategic reasons that either create new revenue opportunities, or reduce operational costs. The technology initiatives of have-mores are directly linked to the net income of the organization. The IT investments of the haves are mostly related to maintaining and managing existing infrastructure.
IT capabilities are not generally leveraged to achieve
Leverage IT heavily to achieve business goals.
Have-mores have exceptionally high-profit-per-employee ratios, which is a direct reflection of their ability to leverage IT capabilities when building out new initiatives and processes. They build new systems that are reproducible and scalable in very efficient, automated ways. They grow through technology expansion, not with the addition of new employees. Haves on the other hand, rely on more manual efforts to realize new business objectives.
Are more focused on the
instead of new opportunities.
Are more focused on new opportunities and are not
distracted by issues.
The vast majority of the companies that roll their eyes when they think of IT have this problem. They associate technology to issues or problems. This has a major impact on their ability to move forward with new technology-based initiatives. If this is you, check out our post on how to build the right IT team to get you out of this spot. For the have-mores, they typically have the right infrastructure, budget, and people in place to have moved well beyond stability issues, and have shifted their efforts to extending their IT capabilities. If issues arise, they solve and move on, never stopping the forward momentum. The primary focus is to continually expand their skills and capabilities to further align their business processes and strategies with their technology.
Associate IT to operations,
Typically cannot differentiate between IT and strategy.
Have-mores do not see a line between the technology enabling their strategic initiatives, and the technology in place for operational execution. Technology, in general, is a part of the DNA of the company, and new initiatives are realized through enhanced organizational IT capabilities. Compare this with the haves who typically line in stage one and two of the IT maturity scale. They use technology to accomplish operational activities, but rarely do their IT capabilities advance to a position where they can create unique competitive advantages. It’s not until stage three and four in the IT maturity scale where companies align technology and strategic initiatives.
IT does not create a competitive advantage.
IT is a huge part in creating competitive advantage.
This is probably the biggest difference between companies that do not value IT capabilities, and ones that do. The ones that have been able to capitalize on their IT capabilities in the form of unique competitive advantages, typically value technology as high as any other capability within the company. Those who do not yet have the ability to control how technology is influencing the business tend to devalue IT.
Although there are a number of additional differences between the two sets of companies, overall the have-mores have moved to make their technology capabilities a competitive advantage. They are shifting their focus away from efforts that do not provide strategic value, and onto the efforts that do. The time and energy they invest in technology is aimed at creating efficiency, lowering costs, enhancing customer relationships, creating new products, and new business models. They have long passed the days where the bulk of their budgets and efforts were allocated to stabilizing and maintaining infrastructure. Companies in the later stages of IT maturity are capitalizing on their hard work and enlarging the gap between them and their competition — or to quote James, Gary and Sree: “the have-mores lead in terms of product, services, business model innovation, and revenue growth — and they are often the ones disrupting their own and other sectors.”