Profit margins today can be heavily influenced by your technology strategy. Normally, defining this strategy would be the job of a CIO or CTO. But most small to mid-market companies do not have a CIO or CTO. This leads to either no tech strategy, or worse, having a non-strategic I.T. person define the strategy.
If you are the CEO or COO of a business without a CIO, the tech strategy is your responsibility. It is much too important of an item to delegate. Ignoring or delegating the strategy to the wrong person leads to increased risk, productivity loss, increased overhead, and possible business closures. The fact is, tech leaders crush tech laggards in their represented industries. And your tech strategy determines if you are a leader, or a laggard. So how do you build a tech strategy if you are not a CIO? To help answer that we’ve put together a guide to help build a rock-solid strategy that will put you in position to crush your competition.
Starting with the end in mind
First, let’s get clear on the point. A successful tech strategy is all about the outcome, not about the technology itself. It doesn’t matter of you are completely digital, or have the latest technology, or are a mobile organization. Those are just tools that may, or may not, have any impact on your business. The point of a tech strategy is to leverage technology in a way that put the business in a position to succeed in today’s highly technical environment. The strategy will by shaped by your industry and the trends that influence it. By using a business first approach you will keep focused on the outcome, and not get distracted by the “latest and greatest” tech trends.
Focus on the right KPI’s
There are hundreds of KPI’s used to measure technology initiatives, but only a few that can clearly show if your strategy is having an impact or not. Start with determining your I.T. spend as a percentage of gross revenue. This will be used initially to help you understand what you spend vs. others in and out of your industry. Next, you’ll want to identify and track your technology investment per user, and overall profit per user. A successful tech strategy will drive profit per person up, and over time, I.T. spend as a percentage of gross revenue down. This will generally cause you to start looking at I.T. spend per user as opposed to a percentage of revenue. This is because a solid tech strategy is centered around enabling your employees to be highly productive. By using spend per user and profit per user as KPI’s you’ll stay focused on the correct business outcomes.
Be real with your budget
Yes, you will need to budget correctly to become a digital leader. This tends to be the biggest battle for CIO’s, and the most important one. The overall Industry average for I.T. spending around 5%-6% of gross revenue. This is highly dependent on industry of course. For an example, on the low-end you have discreet manufacturing which could be spending 2% on I.T., while on the high end a financial services company could be spending over 10% on I.T. Understanding where your industry sits in terms of appropriate budget will help you to start putting yours together. This is probably coming as a shock for most of you, but it is the world we exist in today. And it is understandable given that those who make the transition to becoming a digital leader drive 5X’s the revenue as those who do not. Performing at that level takes effort, and takes investment. There is no way to be a digital leader without.
You need different strategies to accomplish different technology challenges
There are many business objectives your strategy will need to address, so it helps to break your efforts into smaller, more management sections. A simple 3 spoke method is to break the efforts into infrastructure components, operational efficiencies, or strategic initiatives. This generally covers all of areas of focus for a good strategy. Below we break the categories down and examine what should fall into each, and how your budgeting should adjust based on each.
- Infrastructure components – These are all the items necessary to “keep the lights on” or operate the business. Items generally include your general I.T. personnel, servers, cloud services, storage, security hardware and software, communication and Internet lines, communication hardware, email, back office applications like Office 365, your line of business applications, and pretty much anything necessary to keep everyone working and delivering services. Disaster recovery, and business continuity items would fall in this category as well. From a budgeting perspective you need to determine an amount appropriate to keeping operations running smoothly and consistently. That number will be different if you hire internal resources, or outsource, but will stay consistent year to year.
- Operational efficiencies – These are the I.T. personal and efforts done to impact productivity, quality, turn-around times, and anything else that has a direct and measurable impact to the business. Items within this list should have a measurable R.O.I. and should be done as quickly as possible. You should work to get as much of your budget as you can into this category. The better you are at identifying these items and working through them, the more you can increase profit per user.
- Strategic Initiatives – These are items that you think will impact your business now, or in the future, but do not have a very clear return on investment. You’ll most likely need to perform a risk vs. reward analysis to determine what should be implemented, and how much budget should be used. If you are on the aggressive side, you may allocate more budget to investigating and trying new things, even though there is additional risk. If you are on the conservative side, you may allocate much less budget to these items. Monitor your competition and any industry trends, then build a list of initiatives. You may decide not to go forward with them, but the process of keeping an eye on your industry and your competition is a good habit.
Make sure training is a part of your strategy
Often training is only thought of when new team members join your company. This is not nearly enough when you start to embrace technology. The process of continuously examining and updating systems and processes will create gaps in knowledge. A good CIO will see these gaps and will exploit any opportunities to better educate and equip employees; so should you. Have a system in place to identify training opportunities, and act on them. Work to make continuous education a positive and enjoyable part of the culture.
Stop making technology decisions, make business decisions
One of the most valuable things a CIO does is create an abstraction layer between the CEO and the technical decisions necessary to run I.T. Without a CIO your biggest challenge will be to duplicate this abstraction layer. Given that 95% of CEO’s are non-technical, there is no reason you should be making technical decisions. If you are asked which server, or software, or security items to buy, you need to refrain from answering. Instead force your I.T. resources to be accountable for the business objective the technology is supporting. Your technical people should make the technical decisions necessary to get you the business result you need. With this comes a shift in accountability. You’ll need to make sure the person making the decisions can understand the business outcome they are now responsible for. This comes through clear expectations, clear communication, and a high level of trust between each party. If you don’t have that, it will not work.
Stay focused and stay committed
Becoming a tech savvy organization takes time and energy from everyone involved. There will be ups and downs, challenges, frustrations, victories, and everything in between. As the CEO or COO, you will need to help everyone understand the importance of the transition and keep positive during the journey. If you stumble, brush yourself off and keep moving. Your job is to stay confident and stay the course. Your employees will draw their confidence and strength from you. Being a technology leader yields tremendous results, but not everyone can make the journey. Give yourself the time and support needed to get there!