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CXO Advisor
Insight – Innovation - Acceleration
IT intensity and your organisation’s ability to change quickly
Why does IT Intensity matter?
Many authors talk about IT intensity:
 Most refer to it as the spend on IT versus the cost ...
IT Intensity – increasing your scale and reach without
increasing your mass
Using IT you can reach new clients, increase c...
IT Intensity – increasing your scale and reach without
increasing your mass
Using IT you can reach new clients, increase c...
Sample IT Intensity by industry
The numbers are variable across samples but consistent within a single
sample
Source: Gart...
Sample IT Intensity by industry
The numbers are variable across samples but consistent within a single
sample – this is ju...
Ad Hoc Service Process Differentiate Core
Definition Don’t use
much IT at all.
E-mail, word
etc.
Use IT to
service
busines...
Ad Hoc Service Process Differentiat
e
Core
IT Dept.
Posture
Ad hoc Supplier IT Experts Business
Partner
Core
Use IT
straig...
Ad Hoc Service Process Differentiate Core
< 0.5% 0.5% - 1.0% 1.0% - 2.0% 2.0% - 5.0% 5.0% - 10.0%
IT spend as a
percentage...
Ad Hoc Service Process Differentiate Core
Above the
momentum line
spend
0 % 5% 20% 30% 40%
IT budget
(How IT spend is
used...
Ad Hoc Service Process Differentiate Core
IT Projects None 1-2 per annum 5 – 15 pa 15-30 pa > 30 pa
Do no IT
projects
Any ...
Ad Hoc Service Process Differentiate Core
Applications Office Admin System System of
record
Business
process
Differentiati...
Ad Hoc Service Process Differentiate Core
IT Dept. Posture Ad hoc Supplier IT Experts Business Partner Core
IT Spend / TO ...
IT Intensity Scenarios
Scenarios define possible future paths and the “road-signs” that will indicate
which path is unfold...
IT Intensity Scenarios
Scenarios define possible future paths and the “road-signs” that will indicate
which path is unfold...
IT Intensity Scenarios
Scenarios define possible future paths and the “road-signs” that will indicate
which path is unfold...
IT Intensity Scenarios
Scenarios define possible future paths and the “road-signs” that will indicate
which path is unfold...
IT Intensity Scenarios
Scenarios define possible future paths and the “road-signs” that will indicate
which path is unfold...
Summary
IT intensity is about business understanding of what IT can and should do for
the organisation
Often the IT Depart...
IT INTENSITY INCREASES SCALE WITHOUT INCREASING MASS
Terry White
terryw@cxo-advisor.co.za
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IT intensity defines future success

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The concept of IT intensity is explained, and I show how an organisation with the correct IT intensity will be better able to survive future threats. This little understood concept can change the way you do business and the way you think about IT.

However IT intensity is much more than just adding more technology. This must be linked with your processes and strategy.

The bottom line: Do it to yourself before someone does it to you

Published in: Business
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IT intensity defines future success

  1. 1. CXO Advisor Insight – Innovation - Acceleration IT intensity and your organisation’s ability to change quickly
  2. 2. Why does IT Intensity matter? Many authors talk about IT intensity:  Most refer to it as the spend on IT versus the cost base of the business This may be too narrow. I believe that IT intensity is:  The amount of IT needed/used in the production/operation/innovation of a company’s products/services . IT intensity relates to both business cost and revenue
  3. 3. IT Intensity – increasing your scale and reach without increasing your mass Using IT you can reach new clients, increase customer loyalty, open new channels to customers, and create new products (scale) – IT intensity allows companies to compete convincingly no matter the size of the companies IT intensity allows companies to leap-frog competitors more easily IT intensity allows companies to propagate innovations that are less structured than entire business processes (Trial, Proof of concept, Minimum viable products) IT intensity allows companies to capture and retain customers remotely IT intensity is more than a financial measure – it is a measure of use and dependency on IT to deliver business products and services
  4. 4. IT Intensity – increasing your scale and reach without increasing your mass Using IT you can reach new clients, increase customer loyalty, open new channels to customers, and create new products (scale) – without opening new branches, increasing production facilities etc. (mass) IT intensity allows companies to compete convincingly no matter the size of the companies IT intensity allows companies to leap-frog competitors more easily IT intensity allows companies to propagate innovations that are less structured than entire business processes (Trial, Proof of concept, Minimum viable products) IT intensity allows companies to capture and retain customers remotely IT intensity is more than a financial measure – it is a measure of use and dependency on IT to deliver business products and services
  5. 5. Sample IT Intensity by industry The numbers are variable across samples but consistent within a single sample Source: Gartner
  6. 6. Sample IT Intensity by industry The numbers are variable across samples but consistent within a single sample – this is just the top 20 of 94 Rank Industry Name Average IT Intensity HIGH IT INTENSITY 1 Computer systems design and related services 46.09514 2 Miscellaneous professional, scientific, and technical services31.66354 3 Information and data processing services 31.00029 4 Publishing industries (includes software) 15.44312 5 Securities, commodity contracts, and investments 13.45748 6 Administrative and support services 12.67477 7 Legal services 11.1754 8 Insurance carriers and related activities 10.77791 9 Rental and leasing services and lessors of intangible assets 10.63165 10 Computer and electronic products 9.622643 11 Other transportation equipment 9.1888 12 Machinery 8.920644 13 Credit intermediation, and related activities 8.850244 14 Wholesale trade 6.304108 15 Motor vehicles, bodies and trailers, and parts 6.059119 16 Chemical products 5.65757 17 Construction 5.163015 18 Miscellaneous manufacturing 4.595446 19 Electrical equipment, appliances, and components 3.835276 20 Broadcasting and telecommunications 3.821168 Source: Brynjolfsson, et al. (2008) Scale without Mass: Business Process Replication and Industry Dynamics; Electronic copy available at: http://ssrn.com/abstract=980568
  7. 7. Ad Hoc Service Process Differentiate Core Definition Don’t use much IT at all. E-mail, word etc. Use IT to service business administratio n needs. Some GL, HR Fully automated and integrated business processes Use IT to differentiate products and services, reach new markets and provide new channels IT products and services are the business product and services IT Intensity – five levels The amount of IT needed/used in the production/operation/innovation of a company’s products/services . IT intensity relates to both business cost and revenue. IT Intensity increases scale without increasing mass
  8. 8. Ad Hoc Service Process Differentiat e Core IT Dept. Posture Ad hoc Supplier IT Experts Business Partner Core Use IT straight from the store, as and when needed IT department told what the business wants. They get it and run it IT department are experts in IT, but not business experts. Business have a problem, IT looks for the IT solution IT and business work together on business problems. IT brings a unique technology perspective to business issues IT and business are the same. IT innovation is business innovation. New products, markets and channels are a business imperative. Business increases scale without increasing mass IT Intensity affects IT Department posture Posture: The way business sees and uses IT in relation to their business activities, products and services
  9. 9. Ad Hoc Service Process Differentiate Core < 0.5% 0.5% - 1.0% 1.0% - 2.0% 2.0% - 5.0% 5.0% - 10.0% IT spend as a percentage of business revenue Tends to be ad hoc, low spend. Use ad hoc support from outside if something goes wrong. Business spends on IT (often reluctantly) to service business administration needs. IT often feels undervalued, under-resourced and unappreciated. May go up to 2% Business processes are fully automated and integrated. IT spend focused on business improvement at best. May go up to 3.0% Business understands that IT can change the game for them, and uses IT to differentiate their offerings. May go up to 10% IT is the business offering. Internal IT has an external focus. Internal IT used as the test-bed for new products and services. May go up to 45% IT Intensity and IT spend There is a proven relationship between IT spend and business performance. However this relationship is often skewed by poor spend decision making, and definitely affected by legacy spend. (IT spend to business improvement does reach a stage of diminishing returns)
  10. 10. Ad Hoc Service Process Differentiate Core Above the momentum line spend 0 % 5% 20% 30% 40% IT budget (How IT spend is used in the company) Below the line = “Keep the lights on” Above the line = Resourcing IT for business improvement No business improvement initiatives using IT Business improvements focused on improving admin processes and automation. Above the line spend tends to be ad hoc, as needed Business understands they need IT to operate efficiently. They tend not to fund strategic, innovative, or speculative IT initiatives Business knows that a constant stream of differentiating technologies links them closer to customers and markets. They also understand that differentiation is temporary and fund constant development Business is IT. They know that R&D is essential to business success, and fund new IT effectively. They understand that constant funding of development, innovation and breakthrough products is essential IT Intensity and business momentum Business momentum is the amount of money a company needs to spend on IT to maintain the existing momentum of business: Mass (geography, staff, assets etc.), Speed (How fast the business/product/customer cycle works), and Direction (acquisitions, growth, defence of share)
  11. 11. Ad Hoc Service Process Differentiate Core IT Projects None 1-2 per annum 5 – 15 pa 15-30 pa > 30 pa Do no IT projects Any “project” is ad hoc as business administration requirements dictate A number of business (and IT) improvement projects are undertaken In addition to business improvement projects, there are a number of new products, markets, and channel projects. Usually Proof of Concept and Pilot projects Much of what the business does is new business using IT. Maintenance and improvement of IT products / services is well funded. New IT products and services are also extensively pursued. IT Intensity and projects “Projects” may reflect the change using IT in a business. Depends on the nature of the project – four value layers – fix (broken), maintain, improve, create value
  12. 12. Ad Hoc Service Process Differentiate Core Applications Office Admin System System of record Business process Differentiating Applications Core product / service Use off the shelf personal productivity tools Use off the shelf administration IT tools Use COTS ERP systems. Use business process automation tools Have rapid application development tools, to trial and deploy differentiating applications to customers Develop, test, deploy, and maintain IT services and applications into the customer base IT Intensity and applications Typical applications used per intensity level. Cumulative from the left.
  13. 13. Ad Hoc Service Process Differentiate Core IT Dept. Posture Ad hoc Supplier IT Experts Business Partner Core IT Spend / TO < 0.5% 0.5% - 1.0% 1% - 2 % 2% - 5% 5%-10% IT Budget Below Above Below Above Below Above Below Above Below Above 100% 95% 5% 80% 20% 70% 30% 60% 40% IT Projects None 1-2 pa 5-15 pa 15-30 pa > 30 pa Applications Office Admin System System of record Business process Differentiating Applications Core product / service Industry Norms Education IT Intensity – the big picture Farming Manufacturing Food industry Logistics Retail Banking Software Media IT Services Consulting Telecommunications Healthcare Energy & Utilities Government Mining Cloud services Big Data services IT Intensity increases scale without increasing mass BPO Airlines
  14. 14. IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity
  15. 15. IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door (Surprise!) Boiling Frogs (What happened?)
  16. 16. IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too (Fast follower) Shapers (Leaders / disrupters) Boiling Frogs
  17. 17. IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Aliens at the door Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too ShapersBoiling Frogs Roadmap Organisationsuccess Time
  18. 18. IT Intensity Scenarios Scenarios define possible future paths and the “road-signs” that will indicate which path is unfolding Scenarios allow for rapid and intelligent response to different paths Scenarios aid future decisions Aliens at the door Discontinuous Technological Change Predictable Technological Change Low IT Intensity High IT Intensity Aliens at the Door Me too ShapersBoiling Frogs Roadmap Organisationsuccess Time
  19. 19. Summary IT intensity is about business understanding of what IT can and should do for the organisation Often the IT Department acts as a brake on increased IT intensity  Through their posture  Defence of their delivery model  Lack of agility  Inability to communicate at a business level Increasing IT intensity (the right way) increases an organisation’s ability to respond to economic and competitive threats Optimum IT intensity allows organisations to disrupt their market… To lead rather than follow None of this matters if the relationship between IT and the organisation is not a full partnership striving for business success
  20. 20. IT INTENSITY INCREASES SCALE WITHOUT INCREASING MASS Terry White terryw@cxo-advisor.co.za

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