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IT Savvy: Making IT a strategic asset to outperform competitors

Jeanne W. RossJeanne W. Ross

IT Savvy: What Top Executives Must Know to Go from Pain to Gain
Peter Weill and Jeanne W. Ross
Harvard Business Press, Boston 2009

When Ron Williams became president of U.S. health-care services giant, Aetna, Inc., in 2002, the company had just reported an annual loss of $280 million and was on the brink of failure.i Just five years later in 2007, Aetna posted net income of $1.8 billion and was named by Fortune magazine as the country's most admired company in health care. When Williams, now Aetna CEO and chairman, discusses the firm's success, he notes that the development and use of a dynamic information technology (IT) base was essential.ii

Peter WeillPeter Weill

Aetna is IT savvy. The company consistently uses IT to inform management decisions and to enhance its products and services—and being IT savvy pays off. Our research found that firms with above-average IT savvy and spending have margins 20 percent higher than the industry average. In contrast, firms with less-than-average IT spending and savvy have margins 32 percent lower than the industry average. Just as important, being IT savvy puts a firm in the position to take advantage of future business opportunities.iii

How IT savvy is your firm?

IT savvy is reflected in a firm's ability to use IT to consistently drive performance. Like savoir-faire, IT savvy looks effortless from the outside. A quick test will reveal how IT savvy your firm is. Can you:

  • Respond to new customer demands in a timely manner?
  • Present a single face to global customers?
  • Reproduce business successes in a new market?
  • Quickly integrate new acquisitions?
  • Ensure that local decision makers simultaneously do what's best for customers and the firm?

Because IT-savvy firms have the systems to support strategic business priorities, they more often answer “yes” to these questions.

In contrast, firms that are not IT savvy often have systems that were built to support isolated business needs. To address firm-wide needs, these businesses spend much of their IT resources attempting to tie their systems together. Over time, management finds that it takes longer to test new systems and integrate them with existing ones. Besides becoming increasingly vulnerable to systems outages, this patchwork of systems makes it difficult to respond to changing business conditions. As a result, the average firm spends 68 percent of its IT budget operating and maintaining these systems—funds that are then not available for introducing new products or services.iv

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