Does Your IT Strategy Fit Your Industry?
As IT grows up, its _reach extends out — seeping into every industry from accounting to zoology. And your knowledge of industry-specific IT patterns could make or break your business strategy, according to a new report from CSC’s Leading Edge Forum (LEF) Executive Programme.
Developing an IT Strategy for Your Industry draws upon recent LEF research to explore how vertical, industry-based orientation will rise sharply on both the supplier and the customer sides. The paper, available to Executive Programme members, looks at the changing impact of IT by industry, identifying leaders and laggards. And it offers readers a valuable analysis tool to help develop strategies to keep pace with an increasingly vertical world.
From horizontal to vertical
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IT wasn’t always like this. It has historically been horizontal — used similarly and widely across most industry sectors.
Hardware and software suppliers sold products to a range of companies, and it was common for CIOs and other IT executives to move among industries. This model worked because organizations faced similar challenges (back-office payroll or e-mail, for example) that could be solved by the same products.
But now, "technology is moving out of back offices into the front offices, and when it does that, it tends to mirror the industries that it’s serving," says the paper’s author, David Moschella, global research director for the LEF Executive Programme. He notes that front-end, customer-facing activities must continue to diverge by industry if companies want to differentiate themselves.
Since the emergence of the Internet in the mid-1990s, the IT industry has been shifting from supplier-driven to customer-driven. Today’s companies even connect and interact much like the Internet: as a complex network of supplier, partner and customer ecosystems (see image below).
As examples of customer-driven IT, the report highlights the role of Starbucks in launching Wi-Fi; Tesco’s and Wal-Mart’s push for RFID; and how online investing and banking products promoted consumer confidence in the security of the Web. In all three examples, IT customers drove the innovation, not the suppliers.
"The value created by IT customers has become the IT industry’s principal driver," the report states.
"The IT sector is now a self-reinforcing ecosystem where the customers of IT create value for other customers of IT. In such a world, industry-specific value becomes the market’s most important form of innovation."
Know thyself
To create industry-specific value, you must first understand your industry. The report offers a high-level profile of 13 sectors — including energy, retail, defense, banking and manufacturing. It looks at the changing impact of IT across these industries and lists 20 dimensions where IT either has or is expected to have significant industry impact, grouped in three main areas:
- IT’s contribution to economic and business change
- IT’s impact on competition and innovation
- IT’s impact on the societal and regulatory context
"Most CIOs see their organization as being on a journey away from generic IT services toward a role that is more of a business partner, and this typically requires much deeper industry knowledge and skills," the report says. "But applying these trends to any one firm requires thinking about how things will play out in its particular industry sector."
Technology-enabled businesses excel
Moschella suggests that employees take a page from their employers’ notebook and develop industry-specific IT strategies for themselves.
"Whatever your job, whether engineering, accounting or sales, there’s a good chance you’re going to need substantial IT capabilities related to that job," he explains. "The most desirable employees in the future will know how to do both."
And the rise of Technology-Enabled Business Services (TEBS), which blend IT and business capabilities, reinforces the importance of this "double-deep" expertise. Moschella offers a range of examples: credit authorization, energy management, Internet advertising and legal database services, among others.
"Most of these businesses would not consider themselves to be IT companies," the report explains. "Yet it is clear that sophisticated IT skills are integral to the value proposition of these firms. Indeed, these businesses are perhaps the best examples of what we at the LEF call ’business/IT co-evolution.’"
He also notes that CSC’s Project Accelerate strategic growth initiative, with its emphasis on industry expertise and vertical-market solutions, is part of that same co-evolution.
"We are responding to what we are seeing on the client side," Moschella says. "Clients are focused on their own industries, and they want industry-specific services."