Posts tagged ‘Value Chain’

Strategies for an ambidextrous IT organization

The shown figure of Newton’s Cradle is archived in Wikipedia.

I had some very busy weeks and are now trying to catch up again, goal is a (very) short blog each week. This week’s theme is about ambidexterity of IT organizations. Ambidexterity with people is about being equally performant using your left hand as well as your right hand.  Just like the example of Newton’s cradle where the left and right ball (compare to left and right “hand”) are ambidextrous, IT organizations that are optimally aligned to their Businesses should also be ambidextrous.  The desired ambidexterity should become visible especially in the types of services delivered: commoditized IT vs specialized IT.  Just like the left and right hand example of human beings, the IT organization should have a virtual left hand (in line with the left hemisphere of the brain) that is optimized for delivering the virtual left handed services. The left handed services can be bound to represent all commodity IT services. The virtual right hand (in line with the right hemisphere of the brain) should be optimized for delivering the virtual right handed services. These virtual right-handed services can be bound to represent all non-commodity IT services. So the strategy for an ambidextrous IT organization is to become equally performant in delivering commodity as well as specialty IT services. This strategy can come in place if the internal and external IT organization share all these viewpoints, agree with eachother to make a (strict) separation in optimizing the left-handed vs right-handed processes and agree to have or acquire competences that are matched to the type of IT services (commodity vs specialty) to be delivered.  This strategy for an ambidextrous IT organization can also be more easily matched to strategy development processes as described in one of the previous posts Differentiating Strategy Logic It can also be matched easily to separating IT value chains to match specific innovation goals. In one of my next posts I will add some drawings with models designed to  further explaine all of this. For the time being, here is a first draftof the model I have called “Differentiation Reference Model”. 

differentiation-reference-model

 

 

 

 

 

 

 

 

 

An IT Value Chain must be decomposed to match different Innovation Goals

IT organisations should focus on developing two dedicated value chain archetypes, each archetype optimized for specific innovation goals as listed below:

  • differentiate, the ambition of this innovation goal will usually be to become best-in-class compared to your competitors, you can never spend enough money here because this is what makes you survive!
  • neutralize, the ambition of this innovation goal will usually be to become (just) good enough compared to your competitors; you should spend no more money than needed to neutralize (become just as good as your competitor); you should certainly not try to become better than your competitor here by spending more money
  • productivity, the ambition of this innovation goal is to become (just) good enough compared to your competitors; there is no need to become better than your competitor so keep the money in your pocket or rather spend it to differentiate

These innovation goals are realized using Business value chains. To support these Business value chains with IT Products/Services,  there should also be two distinct IT value chains that drive the (internal) IT organization:

  • Commodity IT value chain: probably every organization needs IT products/services that are simple, based on non-differentiating routine tasks, often need for high-volume operations, focus on commodity type of services, sometimes these will be long-lasting services, implemented by simple architectures etc. which if combined together, can become a typical candidate for an Operational Excellent innovation strategy. This IT strategy can be allmost fully decoupled from the overarching Business strategy (whatever that is) and thus have it’s own, dedicated life cycle management.
  • Adaptive IT value chain:  besides commodity IT services, every organization might also have a need for IT products/services that are more complex, sometimes implemented as one-off initiatives, driven by fast time-to-market, driven by the need to differentiate the overarching business processes, sometimes focussed on low-volume operations, often realized with complex and/or adaptive architectures, sometimes implemented as short-lasting services etc.  These IT products/services are mapped to dedicated innovation strategies and will highly depend on the type of IT service needed to support the Business innovation.

So in order to optimize IT efficiencies when having two IT Value Chains, the commodity IT value chain should be setup to become operationally excellent. Here we will only spend the necessary money. We will decouple it’s innovation lifecycle from Business lifecycles to the max. This calls for a very special type of funding since Business usually sees IT as a short-term resource while commodity IT value chain investments usually will call for a more longer-term investment.

The adaptive IT value chain should maximally align with the Business (innovation) lifecycles and should optimize primarily on Business benefits.

This vision leads to the notion that traditional Business-IT alignment strategies might not be optimally suited to support decomposed IT value chains. This is however still a hypotheses which  needs further research. In a next post I will investigate which strategy logic is best suited for either IT Value Chain: Strategy Pyramid vs Strategy Stretch.

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