The short and painful history of e-business has taught us that execution and capability countand that's made the issue of IT infrastructure a timely one. Once viewed as mere plumbing, the pipes and pumps that keep data flowing, executives are finally grasping the connection between IT infrastructure and corporate strategy. But what is that connection, and how do you leverage it? That is the question Peter Weill, the new director of the Center for Information Systems Research at MIT's Sloan School of Management, has been working on.
Weill, an Australian, is no wild-and-wooly Web guru or ivy-covered obscurantist. Says Peter G.W. Keen, a prolific author of books on e-business strategy: "Weill's an academic realist. What he says is reasonable, shrewd and realistic, and very well grounded."
Weill initially laid out the strategy and infrastructure link in the 1998 book he wrote with Marianne Broadbent, Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology (Harvard Business School Press, 1998). His new book, Place to Space: Migrating to eBusiness Models (Harvard Business School Press, 2001), co-authored with Michael R. Vitale, extends that connection to e-business. Weill says e-business has led to the centralization of IT infrastructurewhich is the shared technical foundations on which individual applications are built and maintainedprimarily because e-business models require providing a single point of contact across multiple business lines.
The result of a detailed study of 50 traditional companies' e-business initiatives, the book argues that there are eight "atomic" models for doing business electronicallyincluding the "direct-to-customer" model made famous by Dell Computer Corp. and the "shared infrastructure" model exemplified by Covisint LLC, the online auto parts exchange co-owned by the big-three automakers. Depending on their capabilities, companies can use these "atomic" models as building blocks, snapping them together to furtheror even createa business strategy. How does a company's infrastructure and the underlying architecture affect these models? Can infrastructure determine e-business strategy rather than the other way around? Weill explored these issues with CIO Insight executive editor Allan E. Alter.
CIO INSIGHT: How can CIOs bring the most value to the discussion on e-business strategy?
Peter Weill: I think good CIOs are schizophrenic. They have to be very detail-oriented, very good at the implementation side. But that's just the cost of admission. The really good CIOs also offer a way to affect strategy through technology. We've typically said that business strategy drives IT strategy, but e-business has underscored the notion that technology can create opportunities to affect strategy. Really good CIOs have to get value from their infrastructures and integrate new technologies in a way that is business oriented. The most common complaint I hear from CEOs about their CIOs has to do not with their management of the IT dollar, but with their ability to help the business folks use technology better, to strategize creatively.
What questions must CIOs be prepared to answer in order to be effective in talking with other executives?
They need to know what strategic options are on the minds of the heads of the business units. That's the starting point. Another thing is understanding what competitors are doing with respect to technology. You often see the CEO turn to the CIO and say, "Tell us about the technology platforms of our competitors. Can we be hurt?" Both the defensive and offensive views of technology are important.
By providing a ubiquitous infrastructure, the Internet has allowed much more cooperative business models than we've seen before. CIOs are responsible for negotiating all the agreements linking their companies' technology with other firms. Still, many of these shared infrastructures will be a disaster because it's incredibly difficult to share. If you think about Covisint, you can imagine the discussions going on at Ford Motor Co., General Motors Corp. and Daimler-Chrysler AG about what data should and should not be shared.
How can a CIO use the eight atomic e-business models to analyze IT strategic opportunities for his or her company?
Look at the eight models [see Weill's book, Place to Space, for details] and ask: "What are the competencies of the organization?" By asking what you are good at, you can see which models are appropriate. CIOs have to keep in the back of their minds a set of capabilities for infrastructure and a set of e-business models; those two sets have multiple links from one to the other. The good CIOs in an e-business world will sort those links out, and then figure out which capabilities they should source internally and which in the marketplace.
But changing or combining e-business models means creating new infrastructure, new skills, more systems and more integration. Isn't that a tremendous burden?
It's not only been a burden on the IT organizations, but a burden on the capital expenditure of the firm. Infrastructure comes in large chunks, and those are huge hits. What this does is raise the importance of architecture, an integrated set of standards, policies and organizational frameworks that guide a company's IT decisions. Architecture used to be a background operation for a person who was very technical; it's now become a key strategic option. Architecture decisions made today will predict the infrastructure capabilities of tomorrow, which will predict the business capabilities of the next day. We're seeing firms struggle with the governance of architectural decisions: How do you govern architecture when it's now fundamental to the way in which we do business? Firms have attempted doing this by going through committees and working groups, but there isn't yet a really clear answer.
Cisco is a great example of a Net-based architecture. They used ERP as a core technology, but added functionality with net-based applications. That enabled their business at both the supply and company ends.