1. Strategy #4

2. The Productivity Paradox Productivity = Output/Input How do you measure productivity? –How should output be measured? –How should input be measured? What is the relationship between technology and productivity? How about information technology?

3. Does IT investment lead to increased productivity? Robert Solow – “You can see the computer age everywhere but in the productivity statistics.” –US annual rate of increase in output per hour in the 1960s (2.6%) –1973 – 1995 (1.5%), –1995 – 2000 (2.5%), then dot.com bust, –2002 to present (>5.3%)

4. How Does IT Investment Affect Productivity? Differences between national data, industry data, and firm level data High level of variation between firms Long term benefits from 2 to 8 times higher than short term benefits

5. Complementary Activities IT support is most likely to improve the productivity of knowledge workers, especially where they can take advantage of low cost communications and data analysis IT investment include a number of technologies in addition to computer hardware and software – e.g. BPR, work redesign, organizational change Factors associated with increased IT productivity: self- directed work teams, decentralized decision making, screening for education and training investment, systems that reward high team performance

6. IT-Business Strategic Alignment Ensuring that IT strategy is consistent with business strategy Importance –Size of investment coupled with uncertain benefits –High cost of failure –Potential for IT to be transformative

7. Enablers and Inhibitors of Alignment ENABLERSINHIBITORS Senior Exec support for ITIT/business lack a close relationship IT involved in strategy development IT does not prioritize well IT understands the businessIT fails to meet commitments Business – IT partnershipIT does not understand the business Well-prioritized IT projectsSenior Execs do not support IT IT demonstrates leadershipIT management lacks leadership

8. Strategic Alignment Maturity Levels of maturity copied from Software Engineering Institute Capability Maturity Model What are the assumptions? –Highly aligned relationships are better than those that are less aligned –A firm’s success is highly dependent on IT capability

9. Alignment Criteria (Communication) IT understands business Business understands IT Knowledge sharing

10. Alignment Criteria (Measurement) IT metrics Business metrics Balanced metrics Service level agreements Benchmarking Formal assessment Continuous improvement

11. Alignment Criteria (Governance) Business strategic planning IT strategic planning Budgetary control IT investment management Prioritization Steering committees

12. Alignment Criteria (Partnership) Business perception of IT value Role of IT in strategic planning process Shared goals, risks, rewards/penalties Program management Relationship/trust style Business sponsor/champion

13. Alignment Criteria (Scope/Architecture) Flexible transparent architecture Emerging technology assessment Standards Ability to customize solutions Ability to support enterprise wide business processes

14. Alignment Criteria (Skills) Innovation entrepreneurship Management style Change readiness Career mobility Education and training Social political environment

15. Realizing the Business Value of IT Investments Importance –Amount at risk –Politically valuable Necessary feedback for improving future IS delivery processes

16. AIAC Framework

18. Alignment Phase Align Business-IT Strategy – Porter’s models, Resources – Competencies – Capabilities Invest in complementary assets Choose IT investment type

19. Involvement Involve customers – internal and external Identify metrics for tangible and intangible costs and benefits Make the business case

20. Analysis Establish analytics Validate results Interpret results

21. Communication Make actionable steps Communicate results Institutionalize payoff analysis

22. Concluding Themes IT payoffs are the responsibility of the entire organization, not just the IT department Management of IT payoffs begins prior to investment and continues through post- implementation IT payoffs are contingent on creating and exploiting complementary assets