New book by MIT Sloan researchers helps managers boost margins with technology

CAMBRIDGE, Mass., June 19, 2009 — As IT spending increases and virtually every business interaction becomes increasingly digitized, new levels of IT savvy will be required for all managers — both IT and non-IT — to transform firms’ technology into a strategic asset that boosts margins, according to MIT Sloan researchers.

In IT Savvy: What Top Executives Must Know to Go from Pain to Gain, MIT Sloan School of Management researchers Peter Weill and Jeanne W. Ross offer research-based insights into how companies can best prepare for this transformation. Based on field research in 1,800 organizations in more than 60 countries, the authors describe the practices, competencies, and leadership skills that non-IT managers need to succeed in the digital economy.

“In the current economic environment, companies can’t afford not to become IT savvy,” says Weill. “Firms with above average IT spending and IT savvy have 20% higher margins, those with an above average percentage of shared applications and IT savvy have 30% higher ROAs, and firms with above average IT infrastructure spending and IT savvy have revenue growth three percentage points higher than their industry average.”

The authors boil down what it takes to become IT savvy into three steps. The first is to fix what is broken by actively managing the IT portfolio and assigning clear decision rights and accountability. “This means choosing how they spend IT dollars and holding people accountable for those decisions,” says Weill. “Often, spending is a decentralized process so local projects may meet local needs, but don’t scale or connect together and create a maintenance nightmare. The person who suffers is the customer who has to jump across silos for service throughout the organization. We’ve all experienced this when we have to submit our change of address six times to the same company.”

The second step is creating a digitized platform for business execution and innovation. The authors explain, “Start by identifying what’s not changing. The core business processes in your firm that are not changing define a reliable set of reusable IT-supported data and business processes. The digitized platform standardizes and automates these processes, thereby increasing reliability, decreasing operational cost, and ensuring quality.”

Exploiting the platform for profitable growth, the third step, is the hard — yet fun — part, they write. “To cash in on your platform, you will be changing individual roles, organizational structures, and organizational culture. This is a fundamental business change and, thus, a major leadership challenge.” However, once those changes are made, the addition of a new feature or geographic region is much faster because companies don’t have to spend time integrating a new product or service with the silos that exist, said Weill. “Instead, it bolts on like a Lego block, and with this approach, you get faster time to market on products and services which leads to higher revenue growth.”

“Companies often get the IT they deserve,” says Weill. “If they aren’t clear about strategy and don’t hold people accountable, then IT struggles to keep up and is a source of frustration. This book provides describes the simple and practical steps companies can take to get more value from IT, which are essential as we move into a digital economy.”

About the Authors

MIT Sloan School of Management’s Senior Research Scientist Peter Weill is chairman of MIT’s Center for Information Systems (CISR) and was recognized by Ziff-Davis as # 24 of the “Top 100 Most Influential People in IT” in 2008. Jeanne W. Ross is director of MIT CISR, Sloan principal research scientist, and founding senior editor and former editor-in-chief of MISQ Executive, a journal for managers translating research findings into action.

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

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