Good Business Sense

Good Business Sense

CXOs must immerse themselves in the IT planning process to ensure that technology investments pay off

When people think of the transportation and logistics industry, they usually think of trucks, trains, planes and ships before technology, but the industry has been completely transformed by information technology. My company, Schneider National, was the first company to deploy satellite tracking technology on its trucks nearly 15 years ago, and technology has always been the key enabler in our ability to compete effectively for the privilege of managing our customers' freight and logistics operations.

During the past six months, Schneider executives have spent a lot of time on the strategic planning cycle designed to drive our company's three-year business plan. As part of that work, we reviewed and discussed the vital linkage between business strategy and IT strategy. It should come as no surprise to readers of this magazine that business and IT strategies are inseparable. My goal here is to shed some light on how to successfully connect the two within the strategic planning process.

While it may seem painfully obvious to CIOs, many companies still do not recognise the full potential to be gained from integrating IT decision making with overall business planning. The integration should begin with a clear idea of the business goals and key operating metrics that are the source of competitive advantage for the company. This process, in turn, drives the long-term vision for IT infrastructure and application development, which should be treated as key platforms that drive long-term positioning of the company. As such, business unit leaders must work together to formulate IT plans that support their individual groups, then roll up those plans into the overall corporate operating plan for IT.

Ideally, business managers should be deeply involved in establishing the case for IT investment, and they must prove that the technology is not only needed but will provide a sufficient ROI through lower costs or increased revenue. However, in most companies, the business units invariably want more technology than the IT department can reasonably design, build and deploy in a given year, and their wish lists usually cost more than the company can afford. So the methods that drive prioritisation and funding are critical to reaching the end state of having the right IT projects to support the company's growth strategy. In most cases, the factors for these decisions are not technological, but strategic and financial.

The linkage to business strategy demands that IT investments meet at least one of the following four criteria if they are to be part of a long-term IT strategy and worthy of capital investment.

Improve cost position. There is constant pressure in every company to reduce costs and increase productivity, as measured by revenue per employee. Technology plays an important role in speeding communication, filling and tracking orders, and trimming SG&A costs by reducing dependence on person-to-person interactions. But proving the case for IT investments can sometimes be challenging. In many companies, there is often an assumption that automating a process with technology will somehow magically improve the process - or at the very least make it more efficient. That won't happen without focusing on the underlying business process. Since technology is merely the enabler, any plan for IT investment tied to productivity improvement should be connected from the outset to measurable improvements in operating and financial metrics.

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