IT Strategy - Where to Start

  by Charles Rattray | 11 Aug 2008 | Permalink |

“Good company situation analysis, like good industry and competitive analysis, is a valuable precondition for good strategy making” (Thompson A. A, Strickland A. J, Gamble J. E. (2007). Crafting and Executing Strategy, McGraw-Hill Irwin., p.127), but like all things in life – ‘rubbish in, rubbish out’. Possibly the first thing which interferes with our ability to start the analysis part of strategic thinking is our knowledge about what strategy is, where to begin crafting a strategy, and what tools are available to us. Without understanding what the requirements of strategic thinking are, and how to think strategically, analysis cannot begin. The second hindrance lies in managers’ general desire to have all the detail to hand relating to the organisations current situation. People have a tendency to clutch hold of facts and avoid synthesis of the data they are presented with. The third hindrance is that the world around us is changing, and an organisation’s dependence on its environment – geographical borders, government legislation, and market demographics – can no longer be depended on as a known quantity.

These factors bring us to a point of imperfection which hinders strategic analysis. We have a tendency to complicate issues with both irrelevant information, and a lack of focus on what we actually need to know. However, theory on strategic thinking, planning and execution offers tools for industry and competitor analysis and techniques for evaluating resource capabilities, relative cost position and competitive strength. These tools and techniques, allow managers to zero in on what is important, and these same tools can be used by IT management to kick start their own strategic thinking, but first they will need to know what they don’t know.

Analysis is extremely important for strategic thinking. Without analysis of the information available, strategic options cannot be defined, and the most appropriate option cannot be chosen. No analysis, no plan. No plan, no action. Similarly, since analysis is likely to be an ongoing activity, the use of focused thinking on the important external factors influencing the company – competition, market forces and competitor strategies – all set the scene for thinking through how the organisation can use its balance sheet of strategic assets and liabilities. For an IT department, the strength of its IT resources – assets and relationships between those assets in supporting business process – becomes the anchor stone.

Textbooks on strategy discuss methods to address the external analysis required for strategy analysis and offer approaches to provide solid answers to the questions an organisation needs to ask of itself. These methods are activity based and include identifying an industry’s dominant Economic Features, a Five-Forces Model of Competition analysis, the identification of an Industry’s Driving Forces, Strategic Group Mapping, Monitoring Rivals, identifying Key Factors for future success, and an analysis of Industry outlook in terms of the attractiveness of the opportunity.

For IT departments the internal strategic analysis can include finding answers to questions on how well the current strategy is working, strengths, weaknesses, opportunities and strengths, price and cost competitiveness relative to 3rd party resources, relative competitive strength, and immediate issues to fix. In other words IT management can look at the internal environment of the IT organisation using tools commonly known as SWOT analysis, value chain analysis, benchmarking and competitive strength assessment. These tools help IT management analyse the company, helping to match the external requirements to the internal capabilities. One question remains though – how do we really analyse the IT assets.

Using Application Dependency Mapping (ADM) to begin the assessment of how well the current IT strategy is working is a valid approach. Firstly, analysis of the existing ADM for an IT environment produces facts about how IT is configured in the collections of services that underpin business processes. Understanding the patterns of IT configuration relative to industry standards and competitor approaches (where known) is important. Secondly, when assessing the effectiveness of the current strategy, we need to understand that strategic plans take time to implement and time to take effect. There may be a tendency to analyse the ADM models and asset attributes on a quarterly basis, to see if the strategy is being effective, when in fact it may take a year or more to implement some IT initiatives. Tweaks in the strategy from quarter to quarter may not produce visible results until several quarters later. What is important though is that by analysing change in the ADM models and asset attributes through change analysis and node comparison, it is possible to both demonstrate that any given IT strategy is being implemented and adhered to, and to show the impact of changes as they are made in the environment. This then becomes the source of truth which triggers action and reaction to strategy success and failure, and can occur daily when using automated IT discovery solutions.

Like SWOT analysis, the result of interpreting an IT team’s design and build documentation can lead to subjective findings. For example, concluding that an IT team has strong process and procedures to help it achieve operational excellence is an easy conclusion to draw. It is also a statement often made by CIOs to the board. However, ADM, auto-discovery and indexing of IT assets may show a very different story where perhaps patch and build management are shown to be inconsistent, and where versioning data highlights the disparate editions of the same software package in use across the organisation. What we claim as strength of the IT department may not actually be one. Conversely, ADM and automated discovery of IT assets can clearly show the weaknesses embedded in the IT infrastructure and these weaknesses can be dealt with in the strategic plan.

In today’s world of IT knowledge workers we might want to include resource flexibility as a ‘strength measure’ – how quickly can the IT organisation grow or shrink its resource pool of human capital. Qualitative observations are often used to assess the size and skills of the resource pool required to operate an IT environment and complete or the strategic initiatives required. These qualitative observations are sometimes based on ‘gut feel’ rather than fact. Again, with ADM we can quickly assess the complexity of the IT environment and complete quantitative assessment of what resources are required to support the current front-burner issues and future IT strategic plans.

Defining front-burner issues requiring attention, draws managers in to dealing with aspects of the company strategy they can address now. The danger with this is that they keep on dealing with front-burner issues and don’t spend enough time on the wider strategic issues – witness the fire-fighting approach of many IT teams. That said, zero-ing in on the most important strategic issues is probably the most important aspect of the strategic analysis and provides the key input to deciding on the strategy to follow. ADM and auto-asset discovery provides a view of which potential strategic issues the IT organisation should focus on first, not just the ones currently on fire.

In conclusion we can say that not knowing what strategy is and how to use the models and theory available will prevent us from correctly starting the analysis process. The analysis itself is important in helping us to understand the macro-environment in which the IT environment operates and in knowing its own strengths and weaknesses compared to competitors and other internal departments. However, the analysis should be focused in order to be useful and achievable. From this analysis we can begin to map out the strategic vision of where the IT department needs to be in the future and what its initial direction is going to be. Once the strategic vision is understood, possible strategic options can be identified and assessed. While implementing the best strategic option, IT organisations should continue strategic analysis and make corrective actions as required, remembering the ‘rubbish in, rubbish out’ rule, and remembering that strategic analysis is about creating options. When the analysis is based on current, accurate data about the IT services the organisation supports, IT can mature to the next level – drawing conclusions from proven, actionable data to make strategic improvement.