Financial ManagementBy V. Sambamurthy | Posted 12-01-2001
Organizing the Value Streams
What is the best way to organize each value stream? This section describes the critical IT value streams for the 21st century, and how best to organize them, according to our research. Note also that each section includes brief comments about the number of companies in our study that chose each organizing option.
1. Value Innovation
Value innovation refer to the strategic analysis of business opportunities and ways in which IT can be used to strengthen business competencies, customer relationships and business partner networks. The goal of these activities is to ensure that all IT applications have a strategic focus and that IT is properly aligned with the company's strategic business efforts.
|Centralized||The corporate IT unit is responsible for identifying strategic IT applications||Very rarely used in contemporary firms.|
|Centralized (mirror image role)||Specific individuals within the corporate IT unit are dedicated as account managers for business units or business processes. They develop the specialized knowledge and strong relationships with their business clients and are responsible for stimulating value innovation through IT.||Very rarely used in contemporary firms.|
|Centralized (mirror image units)||Small teams of IT professionals within the corporate IT unit are dedicated to specific business units, processes, business capabilities, or geographical units. These units develop specialized knowledge and focus on effective value innovation through IT for their assigned business unit.||About 20% of the firms in our study used this option|
|Decentralized||Divisional IT units manage value innovation activities.||About 20% of the firms in our study used this approach|
|Federal||Value innovation activities are managed both by corporate IT and divisional IT||Prevalent approach in the firms in our study|
|Independent IT subsidiary||A unit of the independent IT subsidiary focuses on value innovation||Rarely used approach|
2. Solutions Delivery
Solutions delivery refers to the analysis of business needs for IT, deciding on the necessary applications, and delivering them either through internal development, external contracting or packaged software. The goal of these activities is to ensure timely and cost-effective delivery of IT applications.
|Centralized||The corporate IT is responsible for solutions delivery.||Heavily prevalent approach|
|Decentralized||Divisional IT units are responsible for solutions delivery||Used by a few firms|
|Federal||Both the corporate IT and divisional IT units work together on solutions delivery.||Heavily prevalent approach|
|Outsourced||An external outsourcee is contracted for solutions delivery.||Used by a few firms|
|Independent IT subsidiary||An independent IT subsidiary unit is responsible for solutions delivery||Rarely used approach|
3. Services Provisioning
Services provisioning activities refer to the provisioning of utilities such as data centers and services such as helpdesk and desktop management, for all the users of IT across the corporation. The goal of these activities is to provide reliable, cost-effective, and secure IT services to support the IT needs of the firm.
|Centralized||The corporate IT function is responsible for services provisioning.||Commonly used approach|
|Decentralized||Units within the divisions are responsible for services provisioning.||Few companies used this approach|
|Outsourced||An external outsourcee is contracted for services provisioning.||Commonly used approach|
4. Strategic Planning
Definition: Strategic planning activities involves establishing the company's strategic efforts and the manner in which IT will support those efforts. Going forward, strategy and visioning are critical for understanding the range of IT-enabled strategic options available and the means by which these options can be leveraged for business success. Strategic planning aims to ensure that the firm is effectively guiding its growth through IT and not being outmaneuvered by its rivals through IT-based innovation.
|Centralized||Corporate IT is responsible for strategic planning activities.||Heavily used approach by firms in our study|
|Federal||Both the corporate IT and the business unit IT groups have responsibility for strategic planning activities. Their planning activities are coordinated through the strategic planning process.||Rarely used by firms in our study|
5. Financial Management
Financial management refers to the structuring of service level agreements, tracking and benchmarking the cost of IT services, and developing the business case and ROI analyses of potential IT infrastructure investments. The goal of these activities is to ensure sound fiscal management of IT, its investments and assets, and to demonstrate evidence of the business value generated through IT.
|Centralized||Corporate IT is responsible for financial management||Common approach|
6. Enterprise Leverage
Enterprise leverage refers to IT activities that are aimed at managing cross-unit synergies across the corporation. Examples of enterprise leverage include the enterprise-wide sharing and transfer of best practices, common systems management, and the implementation and management of seamless global processes, such as ERP. The goal of enterprise leverage is to reap "economies of expertise" throughout the company so that innovations, knowledge, and ideas are fully shared.
|Centralized||Corporate IT is assigned the responsibility for best practices, common systems, and global process enablement (ERP)||Common approach|
Commercialization of Assets
7. Commercialization of Assets
This refers to any effort to exploit existing IT knowledge and expertise through consulting services to other firms or by selling services to leverage your existing IT assets and competencies. The goal of the commercialization of assets is to enhance the firm's revenue streams by offering IT-based knowledge, systems and services to other firms or customers.
|Subsidiary||A separate IT unit is assigned with the responsibility for generating revenue through IT products, services, or solutions.||Used by about two companies|
|Joint venture||The firm collaborates with external business partners, such as IT vendors or consultants, to develop a business opportunity for selling IT products, services, or solutions.||Used by about two companies|
Infrastructure refers to the effort to build and manage the architectural blueprint for investments in computing, networking, database, object-base, and other key information technologies that form the IT infrastructure. Infrastructure also refers to the establishment and management of IT infrastructure standards. The goal of infrastructure activities is to establish an IT infrastructure that is of sufficient reach and range, flexibility, and scalability to the business needs.
|Centralized||Corporate IT is vested with the authority and responsibility for the infrastructure activities||Majority of the firms in our study used this option|
|Outsourced||An external outsourcee is responsible for infrastructure activities||Less than 10% of the firms in our study used this option.|
Knowledge resides both within the firm's human capital and in its network of relationships with key external partners. Such knowledge involves not only technical skills and technologies but also project management, client relationship management, and business innovation.
|Internal capability centers||The IT function identifies critically valued IT competencies, including technical, account management, project management, and other IT management skills. IT professionals are assigned to skills centers, with each skill center assigned to raise the level of competence with a specific skill. The coach of each skill center is responsible for the training and competency enhancement of the IT professionals assigned to that skill center. IT professionals are assigned to specific project teams whenever those skills are required; at the completion of the project, they return to their skill center for further training or assignment to another project.||About 30% of the firms in our study used this approach.|
|Joint venture||Knowledge generation occurs through a subsidiary organization that is funded in collaboration with other business firms. As the joint venture generates knowledge, valuable knowledge is assimilated into the IT function.||About two firms used this option.|
|Cooperative Alliances||Knowledge generation occurs through collaborative activities with IT vendors or consultants.||About 20% of the firms used this option.|
|Memberships||Knowledge generation occurs through memberships in knowledge-creating or knowledge-disseminating organizations such as Gartner, Research Board, or the Advanced Practices Council.||About 15% of the firms used this approach|
Relationships refer to networking among IT and business executives, executive management, and external partners, including vendors and consultants.
|Organizing Tactic||Description||Number of companies|
|Formal councils and cross-functional teams||Groups of business and IT executives.||Intensively used by most companies in our study|
|Job rotation||Short-term assignment (30 to 180 days) of IT professionals into different IT, business, functional, or geographical areas||Common practice in most firms in our study|
|Alliance management teams||Team of business and IT executives responsible for coordinating with external partners||Used in a few firms in our study|
|Informal one-on-one relationships||Informal networking among IT and business executives||Common practice in most firms in our study|