Submitted by phay on Fri, 11/04/2011 – 09:01
Can business strategy be created in isolation of the technology considerations? There is a widespread belief in the Business Community that Business Strategy comes first and then technology follows in some way to support that business.
In my experience the common perception among organizations is that Business defines its strategy first and then technology enables the strategy.
Strategy Development Process:
In order to explore the role technology plays in shaping and supporting the business, let’s look at how strategies are developed. There has been a significant amount of research done and published in understanding how strategies are developed. Here are some relevant highlights.
There are two main dimensions to strategy development.
- Visionary thinking based on intuition, a sense, an ability to make bold predictions and define goals.
- Strategy development is largely based on scientific analysis, considering options and recommendations based on the analysis followed by implementation.
- Strategic Analysis guided by scientific approach understanding your markets, competitors, value chain, bargaining power of the key stakeholders. It also entails understanding the strengths and weaknesses of your organization against the opportunities and threat that the external environment presents
- Strategy Formulation guided by analytical findings, alignment to the vision and overall goals of the organization to create a strategic road-map
- Strategy Implementation is of course converting the strategy to real results by successfully implementing the strategy
It is the strategy development that is the focus of this article. Specifically, strategic analysis which then guides the strategy formulation and implementation.
Is there a place for technological consideration in strategic analysis? The answer is quite apparent as demonstrated through examples next.
Technological Influences on the Business Landscape
Examples of technologies that have had transformation impact on business value chain and have redefined markets and distribution channels are all around us.
The globalization phenomenon enabled by the internet is one of most profound. The Internet has impacted all the traditional dimensions of business strategy (reduction in barriers to entry, increased market size across the globe without limitations of geographic divide, increased competition etc.).
Financial services industry is a prime example of an industry where technology has transformed the value chain, redefined competitive forces and given the consumers tremendous amount of bargaining power. Entry barrier have been declining, new competitor have emerged. Some financial products and services have become more transparent and commodities making the market more competitive. Internet as a tool to create a new service delivery channel (reduced channel costs, 24 by7 availability) has put pressure on the more traditional branch based channels. The resulting service delivery cost structure has changed. ING is operating on the model that bricks and mortar are not required to sell its banking products and services.
Healthcare value chain has been transformed by technological advances, linking healthcare records through electronic information exchange, diagnostic imaging from traditional film based to digital imaging has redefined the value chain and changed the balance of power between the suppliers, buyers not to mention the very nature of the products and services being delivered.
Retail Industry is another such example where technology has changed the business landscape. Amazon’s strategic business model was completely defined by technology.
Relationship between Business and Technology
Given how profoundly technology has influenced our business and personal lives, it is hard to fathom how a successful business strategy can be defined without considering technological influences and enablers. By creating a partnership between Business and Technology at the Strategy development stage, you are creating a strategy that is well formed and can maximize business value and competitive positioning by embedding technological considerations from the very start (and not an after thought!).
So why is it that there is a significant divide between the Business and Technology? In subsequent articles, I will focus on why there is this barrier (real or perceived) that creates this divide between Business and Technology.
If you have examples to demonstrate the benefits of business/technology partnerships, please share your thoughts on this forum.