Presentation on theme: "M is for growth Jyoti Banerjee, M INSTITUTE. Question: Does IT matter? oRobert Solow: no evidence that IT made any difference to US productivity across."— Presentation transcript:
Question: Does IT matter? oRobert Solow: no evidence that IT made any difference to US productivity across the 80s and 90s oNicholas Carr: IT is an essential infrastructural element, like electricity or air- conditioning, but without any competitive advantage
IT really does matter oKeystone: IT matters in mid-size firms because it enables oProfitable business growth oScale – increases in the complexity of business processes, organisation and business model.
Mid size enterprises power the UK economy oOnly 6% of UK companies are in the £10m - £250m turnover bracket oYet they employ 30% of the British workforce oAnd generate 20% of corporate profits oAnd grow at over 8% per annum oDespite their performance, they are nearly invisible oThey are usually lumped together with small and micro enterprises which are very different from them in character and operation.
Understanding M companies oM-focused research from the Institute of Chartered Accountants: oTaking the M out of SME – a research study from the ICA and BDO Stoy Hayward
Seven differences – different ballpark? Small businessMedium business Owner-managedProfessional management Micro-management of employees Culture enables employee development Informal processesFormal processes and structures Short-term horizonLonger-term planning horizon Low external inputExternal input from professionals Equity held by founder / family Wider equity base Small customer baseDiversified customer base Source: 2005 research by the Institute of Chartered Accountants and BDO Stoy Hayward
How IT is analysed makes a big difference oThe amount of money spent on IT is a poor indicator oKeystone analysed what IT does in all major areas of a business: oSales and marketing oFinance oOperations oProduct development oSupply chain management oHuman Resource Management oInfrastructure
Scenario-based IT Scorecard 1.Sales Pipeline Mgmt. 2.Proposal Development and Management 3.Relationship Management Database 4.Big company web presence 5.Customer self service 6.Marketing & Campaign Management 7.Complete insight about my customers 1.Easy period close 2.Effectively pay suppliers/ partners on time 3.Automated and timely collections 4.Automated Payroll 5.Online, integrated banking 6.Taxes across products and regions 7.Automated corporate governance 8.Effective forecasting 9.Complete insight about my finances 1.Project Planning and Mgmt. 2.Contract & Change Order Mgmt. 3.Time and Expense Reporting 4.Resource Management 5.Procurement and Subcontractor Management 6.Document Management and Delivery 7.Benefits & Administration Mgmt. 8.Performance & Incentives Mgmt. 1.Easy to find information 2.Easy to use information 1.A network ties all computers and devices together 2.Easy access to the Internet 3.Pervasive Security 4.Mobile and remote access to information and processes 3. Easy to Communicate 4. Easy to Coordinate Teamwork 5. Manage and Protect Data 6. Manage and Configure Devices 7. Update SW on all desktops Sales/Marketing Finance & Administration Operations Empowered Professionals IT Infrastructure
Sample IT Scorecard for PrintForLess.com Sales & Marketing Overall Score Finance Operations Empowered Professionals IT Infrastructure 19992005 20%73% 25%75% 10%60% 40%67% 20%83% 43%86%
Proposition: larger firms can make better use of IT 2003 Revenue, $$Millions Bottom 25% 2 nd 25% 3 rd 25% Top 25% 21.36 23.59 23.52 19.43 Quartiles based on IT Capability Operating Margin 10.58 10.21 12.42 7.29 Employee Count 228 250 257 197 Proposition not supported by the data
Proposition: spending more on IT gives you more capability Bottom 25% 2 nd 25% 3 rd 25% Top 25% Quartiles based on IT Capability IT Spend % Revenue 7.50 11.65 6.36 3.21 IT Dollars (K) Spent per Employee 7.02 10.97 5.82 3.17 # PCs per Employee 0.990 1.122 0.979 0.997 Better IT Capability costs marginally more. Other factors increase the cost of IT significantly without providing better capabilities. In all cases, roughly one PC to one employee Proposition not supported by the data
Multi-step / process-led IT works Implementing the process changes in software and systems. Identifying the specific process changes needed to drive each key business lever. Business Strategy A data-driven vision of how to use the key economic and competitive levers in your business to drive success. ? Business Process Technology Implementation
Multi-step / process-led IT works o Formalised processes: easier to handle complexity o Streamlined operations: growth without headcount increases o Flexibility: take advantage of new opportunities o Better decisions: visibility of critical business issues Implementing the process changes in software and systems. Identifying the specific process changes needed to drive each key business lever. Business Strategy A data-driven vision of how to use the key economic and competitive levers in your business to drive success. Profitable Sales Growth Ability to scale up the business at minimal incremental cost. Business Process Technology Implementation
Applying the model to PrintForLess.com Implementing the process changes in software and systems. Identifying the specific process changes needed to drive each key business lever. Business Strategy A data-driven vision of how to use the key economic and competitive levers in your business to drive success. Profitable Sales Growth Ability to scale up the business at minimal incremental cost. Business Process Technology Implementation Implemented new order processing system and developed partner portal. Expand effective capacity via partners: New work sorted for profit potential Lower profit work dispersed to partners. Vision: Increasing capacity utilization through leveraging partners. Business achieves utilization of 120% of capacity; dramatic increase in profitability. PrintForLess.Com Example
Bottom Line On a 100 point IT capability scale, 10 points of improved IT capability delivers 1.9% of compounded annual revenue growth oResult applies to product and service companies oModel works in US / Latin America / Europe surveys
M-scaled challenges ChallengeProcess issue Exec TalentFinding the right people to fit the right processes Growth strategyIdentifying the levers for competitive differentiation and growth FinanceFinancial strategies needed to deliver business goals TechnologyTechnology infrastructure and applications to formalise processes in organisation External inputGetting help from the right people to deal with these challenges Regulatory impactDont forget that the government remains a key player in your business