Great Companies Think Alike: IT Is a Strategic Asset

Ann All spoke with Jeanne Ross, co- author with Peter Weill of “IT Savvy” (Harvard Business Publishing), which is designed to give executives the information they need to understand and leverage IT for profitable growth. She is director of the Center for Information Systems Research (CISR) at MIT and founding senior editor and former editor-in-chief of MISQ Executive. Weill is chairman of the CISR. Read an excerpt of the book in IT Business Edge's Knowledge Network.

All: The concept of a digitized platform is a focal point of your book. Can you explain what it is?
Ross: Over the past few years as we’ve been studying how companies get value from IT, the thing that was striking to us was the number of companies that basically were trying to get rid of the worst of their silos and all of the spaghetti they created. The reality is, we’re never going to get rid of all that. It was years and years in the making. So it’s there. But when we look at companies that use IT as a strategic asset, our sense is that they have at least gotten some of that under control. They’ve built what we call a digitized platform, which means they’ve extracted from the spaghetti something really core to their business. And they’ve basically wired in some essential capabilities.

People sometimes refer to this as sacred transactions or sacred data. The idea is that there are now some things that are so stable, so fundamental to the business that we don’t want different people doing them different ways. We want them the same way all the time, and we want it low-cost and basically automated.

All: And you advise folks to focus first on those kinds of consistent processes.
Ross: Yes. The research that led to this involves well-established companies. I did three case studies of companies that were created in the 1860s. To some extent, though, these problems recur in companies that were created in the ‘90s. When you’re a new company, you don’t know how you’re going to make money. You see an opportunity, grab it and then later worry about how it ties back, in a process way, to other things you’re doing. Their standards aren’t that disciplined. They have to seize the moment and see what happens. When you get big and old and have these systems in place, you say, “We can’t keep doing business this way. We have to grow up.”

All: The design of such platforms is only part of the process covered in your book. A lot of work is necessary both before and after creating the platform. Before creating the platform, you discuss the importance of defining an operating model and offer four examples: coordination, unification, diversification and replication. Will all companies fall under one of these four models, or perhaps some combination of the four?

Ross: I think to some extent this gets back to the clarity we see in any great business. There’s something clear about the strategic thrust of a great company. If we look at different divisions or business units of a given company, we’ll see different operating models. But if you can’t be clear on your operating model, you’ll get a strategy that’s mushy. I think you pay a price for that lack of commitment. P&G is a beautiful example of this. They decided to standardize everything, and it was a lot of stuff. But there’s been no doubt in their minds that it’s about doing what each brand manager needs to do to be successful. So even though we saw this solid platform of shared services,  they are clearly a diversification model. Because when push comes to shove, they are going to say, “The brand manager rules.” This is a company that built its platform with total clarity about how it wants the business to fundamentally operate.

So often when we saw ERP or CRM systems going in, we’d hear business managers say, “We’ll just wait it out.” I think what we see in the great companies is they commit to how they are going to operate, and then there is actually time to build and leverage a platform. That’s what technology does to you. It requires you to commit. If we look at what’s stable in our firms and rely on technology to support that, then we free up our people to support the things that are changing all the time. That’s a great mix. People can change and respond to the moment, but technology should be something everybody can count on and rely on it. Not that you never want to change it, but it’s the last thing to change as you look at business opportunities.

All: Does the drive for this need to come from the very top? It would seem so.
Ross: We’ve certainly seen IT people who get this more clearly than the CEO or the board. So they take them by the hand and educate them. This works particularly well in a coordination model. If there’s no real consensus on what to do, IT units can point out that it keeps coming back to data. They can say, “Let’s find a way to fund things that ensure the data comes out right.” Funding is a small piece of it, though. If they’ve got their act together, they can think ahead, they can design databases for the future and not just the present. We see companies where IT says, “Let’s just take for granted that data is going to be precious. And we’ll do everything we can to make it accessible moving forward.” And then what often happens is, senior management starts to see it.

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