The Road to Business Value. An Integrated Approach To IT Investment

Transcription

1 An Integrated Approach To IT Investment

2 Introduction No doubt many executives exploring the myriad technology investment paths that lie before them can empathize with Alice in Wonderland. A well-known passage in Lewis Carroll s book describes how, upon meeting the Cheshire Cat, Alice sought his advice about which direction she should take, Would you tell me, please, which way I ought to go from here? That depends a good deal on where you want to get to, said the Cat. I don t much care where, said Alice. Then it doesn t matter which way you go, said the Cat. The road to effectively applying technology can be equally confusing. Reeling from the ripple effects of a succession of technology projects that disappointed or outright failed, executives are looking for new ways to generate tangible business value from their IT investments. And the stakes have never been higher. Given the increasingly critical role technology plays in the competitive positioning of an organization from adaptive supply chains to innovative customer relationships A.T. Kearney believes the gap will widen between companies that use their technology effectively and those that don t. In a complex corporation with dynamic changes, competing projects and shifting priorities, how can a company build an IT organization that fosters innovation and creates long-term value for the business? With so many roads to choose from, which IT initiatives create value and growth for an organization and how does a company organize to capture this benefit? An A.T. Kearney study conducted by Harris Interactive asked executives from the United States and Europe how they manage and use information technology to create measurable business value and position their companies for future competitive advantage (see sidebar: About the Study). We found that the leaders consistently master the following: Move beyond IT alignment toward integration of business and technology Manage IT as a portfolio of capabilities from operational costs to innovative opportunities Invest in leading-edge, innovative IT as an organizational activity aimed at delivering business value Integrate measurement into the evaluation and strategic decision-making for IT investments Anticipate the next wave of technology and define its impact on businesses and industries This paper highlights the key findings of the research, offers examples of best practices and suggests critical next steps for companies that want their IT to play a major role in defining and creating a competitive edge.

3 2 BEYOND ALIGNMENT: INTEGRATION Alignment between IT strategy and corporate strategy is critical but it is not the straightest road to business value. Companies can extract even more from their IT investments if they move one step further, viewing IT planning and execution as an integrated business process built on a solid partnership between business and technology executives. In other words, rather than passing the baton like runners in a relay race, business and IT executives need to move together toward the finish line. But today s organizations are rarely structured to realize the benefits that such a model can deliver. The A.T. Kearney study reveals that although companies believe IT adds value to the business, their planning and governance models do not allow the organization to capture full benefit from their IT investments. Consider how companies typically plan IT strategies and projects. According to the study, 91 percent of business executives say IT enables business strategies, and almost all state that IT creates value relative to their competition (see figure 1). Yet only one-third say their IT planning is fully integrated with their business strategy. And although business value wields increasing influence in IT project sponsorship, IT executives often lack access to the boardroom. The study reveals that only 35 percent of the companies surveyed involve IT in the overall capital planning process (see figure 2). There are many reasons for this divide between the business and IT elements of an organization. At a structural level, they are typically separate: Business executives run operations and define strategy, while IT leaders manage technology. The chief information officer (CIO) is rarely included in the strategy planning process. This structure does not foster the communication and collaboration that are crucial to piecing together the puzzle of which investments In late 2002, A.T. Kearney sponsored a global research project to better understand how technology is incorporated into companies business strategies, the decisionmaking around these strategies, and business issues related to the adoption and implementation of technology. Survey respondents include board members and senior-level executives from European and American companies with US$500 million or more in revenue. The executives are About the Study directly involved in their companies IT investment decisions. Participants were asked about their current IT investments, business strategies and priorities, as well as those on the horizon for The study, conducted by Harris Interactive, had a sample size of 144, which was broken down into 74 respondents from the United States and 70 from Europe. The research focused on companies across five key industries: automotive, communications and high-tech, consumer products and retail, financial institutions, and process industries (energy and chemicals). The study focused on five key areas that help create an IT organization that builds long-term value for the business: IT investment distribution and decision drivers, business-it planning integration, IT adoption and priorities, the business-focused IT organization, and IT value and measurement.

4 Figure 1: Companies say IT is a key enabler of business strategy, yet IT is not a fully integrated partner in business planning TO WHAT EXTENT DO INVESTMENTS IN IT ENABLE YOUR COMPANY S BUSINESS STRATEGIES? HOW WOULD YOU DESCRIBE THE ALIGNMENT BETWEEN YOUR BUSINESS PLANNING AND YOUR IT INVESTMENT PLANNING? 2% 7% Fully integrated and developed simultaneously IT plan developed with direct reference to the business plan 32% 43% 41% 50% IT plan developed independently and aligned where possible Plans partially aligned on an ad-hoc basis 8% 14% Plans not aligned 2% Great extent Some extent Little extent Not at all We do not do IT investment planning 1% Source: A.T. Kearney Figure 2: Most companies do not involve IT leaders in capital planning WHICH OF THE FOLLOWING BEST CHARACTERIZES THE SPONSORSHIP OF IT INVESTMENT AT YOUR COMPANY OVER THE PAST TWO YEARS? WHICH OF THE FOLLOWING BEST DESCRIBES IT S INVOLVEMENT IN THE OVERALL CAPITAL BUDGET PLANNING PROCESS? 39% 35% 6% 19% 35% 13% 12% 40% All business driven Mostly business driven About half business and half IT driven Mostly IT driven 1% All IT driven IT is integral and competes with business projects IT is integral for IT projects only IT consults to process but is not directly involved IT is not included in planning at corporate level Source: A.T. Kearney

5 Almost all respondents say that IT creates value relative to their competition, yet only one-third say their IT planning is integrated with their business strategy.

6 5 are both technologically feasible and strategically appropriate. At a leadership level, the CIO is generally not viewed as a collaborative peer among an organization s senior team. Companies can overcome the issues that inhibit the integration of business and technology strategies by explicitly addressing their structural organizations and leadership positions. From a structural standpoint, companies in which business and technology managers solve business problems side-by-side can better control costs and create fresh ideas for growing revenues and profits. A.T. Kearney s client experience consistently reveals that organizations can improve their structures by integrating information technology with the rest of the business. For example, organizational models should place the chief information officer at the corporate strategy and planning tables alongside the business unit heads. The CIO should report directly to the CEO and actively participate in the corporate planning and strategy process. When technology leaders are evaluated on how they bring forward IT-enabled business results, they have more incentive to achieve sustainable business value rather than simply implementing projects on time and within budget. And just as technology executives should be held accountable for business results, business managers should be responsible for results realized from IT. Business unit heads should not only help set the IT agenda but be responsible for extracting value from IT projects. Technology project leaders should work with, and report to, a business leader who is responsible for ensuring the initiative achieves solid business results. Along with structural changes, business and IT executives must also support and lead the charge toward integration. The CIO must be a business leader who understands technology not a technologist. Today s CIO must be able to articulate to top management, business unit leaders and line employees how new technologies will help the company achieve its objectives. This leader s understanding must extend well beyond the specifics of a technology to how that technology can better position the company for competitive advantage. As projects focus more closely on achieving measurable business value, and as the partnership between IT and business solidifies, this skill will become crucial. And over time, developing this and other business skills will make the CIO a vital contributor at the corporate strategy and planning table. In fact, the A.T. Kearney survey shows that the CIO s background continues to shift toward a wider breadth of operations experience and business expertise. Eighty-nine percent of those surveyed say an operations background is critical for the CIO, and 75 percent say a financial background is critical. One survey respondent, Lands End, represents a good example of integration between the business and IT organization. The executive team, consisting of the CIO and other senior leaders, formulates the company s business strategies and initiatives. Key strategic and technology initiatives are communicated to all employees to ensure that everyone is aware of the company s strategic direction. An IT steering committee, made up of business vice presidents and the CIO, prioritizes the company s IT initiatives and approves its technology blueprint its roadmap for implementing the applications and infrastructure that will best support the Lands End business strategy. Lands End CIO Frank Giannantonio was recruited by the company s chief operating officer

7 6 to lead the IT organization and sit on the executive team. Giannantonio summarizes the requirements of a successful CIO: You have to do many things. You have to be a strategist, a business partner, an architect and an executive. You have to be all four. And I think the CIO has to sit at the table with the senior executives. That s extremely important. BUILDING A BALANCED PORTFOLIO: THE HOLISTIC APPROACH Companies and executives need to look more holistically at IT and treat it as a portfolio rather than an independent series of projects. A.T. Kearney believes an IT portfolio needs to focus on three distinct areas where IT adds to shareholder value operational excellence, business enablement and innovation (see figure 3). By segmenting technology-related initiatives in this way, management can vary its approach to sponsorship and measurement and define its value expectations depending on the type of project. The first group of projects in the portfolio, those designed to achieve IT operational excellence, take information systems to higher levels of effectiveness and cost efficiency. Companies achieve operational excellence when they provide core technology support and meet service levels cost-effectively. The second category in the portfolio represents projects in which IT is a business enabler and transformation tool for core business processes within the organization. While the objective of IT operational excellence is to create world-class support for the enterprise, Figure 3: To generate shareholder value, the IT portfolio must concentrate on three distinct areas IT PORTFOLIO MODEL SHAREHOLDER VALUE CREATION CEO s IT Agenda Breakthrough innovation in ITenabled new products and services GOALS Gain competitive advantage from new and emerging technologies STRATEGIC OBJECTIVE Innovation and industry or segment transformation Profitability and growth using IT as a business enabler IT operational excellence Align technology with corporate strategy Deliver IT-enabled projects to transform the enterprise Build world-class IT capabilities to support the enterprise Minimize costs of IT operations World-class value chain and operations World-class IT support for the enterprise Source: A.T. Kearney

8 7 the goal of IT-enabling processes is to take value chains and business operations to worldclass levels. The measure of success is not cost reduction but improvements in business returns or growth. The final group in the portfolio consists of projects aimed at achieving breakthrough innovation to realize a competitive edge in the marketplace. These initiatives move beyond improving processes to helping transform competitive strategies and market dynamics, repositioning a company against its competitors or allowing it to enter markets where it did not previously compete. The portfolio approach stresses balance and that includes balancing the sponsorship of technology initiatives controlled by the IT organization and those under the authority of decentralized business units (see sidebar: Europe: Speeding toward the Customer and Integration). Companies that take a portfolio approach to IT investing can more accurately determine which information services can be shared effectively among business units and which are unique to specific operating divisions. For example, infrastructure services (think networking and desktop computing) generally fall in the operational excellence category and lend themselves well to a sharedservice arrangement to be managed centrally. Each department in the company has similar needs in these areas, and because all units use these capabilities, the enterprise enjoys the benefits of scale and standardization. On the other hand, applications such as customer relationship management (CRM) or mobility solutions, which typically fall in the innovation or business enabler categories, may need to be chosen and run by business units based on their specific strategic and operating requirements. These individual business units must sponsor and tailor solutions to their customer and end-user needs. When it comes to leading-edge technologies, it is vital to involve business leaders in the definition of needs, evaluation, implementation and rollout. The study confirms these principles; almost 60 percent of the study s leading-edge or early adopters state that business needs determine sponsorship of IT investment. In addition, respondents who perceive the value of IT as high say that 58 percent of their IT budget is sponsored by the business units. Balance is critical, though; in companies with low perceived value of IT, 88 percent of IT projects are sponsored by individual business units. One example of this balance between business unit and corporate sponsorship of IT investments is survey participant Great Southern Bank. For this commercial bank, infrastructure investments such as an ATM network, security, electronic check processing and electronic account statements are made at the corporate IT level and shared among all the business units. At the same time, individual business units sponsor investments in specific applications, such as a CRM system (sponsored by the bank) that tracks transactions for its 65,000 customers, and the bank s insurance claims processing application (sponsored by the insurance business). This allows Great Southern Bank to put its corporate IT investments to good work across its business units and simultaneously enable its business units to use technology tailored to its specific needs. To find the ideal balance, executives need to understand and formally document the business capabilities enabled by IT. What is the goal of the investment? What is the cost reduction?

9 8 What is the operational improvement? Did it create an innovative solution to attract customers? Answering these questions will help business and IT leaders better understand whether their IT investments are in sync with their business goals. The answer can also help executives determine whether or not a capability should be sponsored centrally. This information will help the organization develop an investment planning roadmap that will help reduce operational costs, enable business processes and drive innovative solutions. THE ROOTS OF INNOVATION: BUSINESS VALUE Innovation is distinct in its role there is no guarantee of success and many organizations ignore its potential. A.T. Kearney believes that Europe: Speeding toward the Customer and Integration Although European companies in general face similar challenges to their peers in the United States, the A.T. Kearney survey revealed a few differences as well. And, of course, differences also exist among European countries. To succeed on a global scale, European companies must overcome the fragmentation of their region from language and currency to organizational models. This fragmentation, which exists all the way through to IT investment decisions, makes integration and collaboration much more challenging for European companies. In addition, European companies generally give greater authority to individual business units than American companies do, and the business units are the primary sponsors of IT investments. However, these differences add to the complexities of IT integration. Getting closer to the customer and improving sales and marketing are other areas where Europe expects to gain ground quickly. Typically, firms in Europe have excelled in engineering and products but lagged in marketing efforts. Although economic conditions have diminished IT budgets, companies in Europe are moving toward more customer-centric business models and applications. They are investing in technologies that will improve integration, both internally and externally. More than 75 percent of European companies are currently investing in CRM or will do so in the next year. In addition, European firms invest heavily in web services (81 percent) and mobility applications (61 percent). These customer-centric technologies should pave the way for future investments in tools such as customer and business analytics. Organizationally, the typical European CIO is becoming more business focused. As with U.S. firms, a CIO with an operations background is perceived as valuable. However, European CIOs are even less likely to be involved in corporate planning sessions than their American peers. This explains the lower alignment scores in the survey. Given Europe s decentralized nature, it is not surprising that different regions invest in different IT applications and initiatives. The following is a sample of the findings: Seventy-four percent of northern European companies are currently investing in CRM applications. In southern Europe, 70 percent of those surveyed are investing in procurement management tools, and 50 percent are investing in real-time manufacturing solutions. Companies in northern Europe and the United Kingdom are more likely to invest in mobility than those in the United States or southern Europe.

10 9 by integrating business and technology strategies, companies are better positioned to adopt and develop more innovative technology that confers a competitive advantage if business value is at the center of investment decisions. The study reveals that 50 percent of innovative companies (those that spend the largest fraction of their new IT budget allocations on innovative IT solutions rather than cost and growth initiatives) state their IT planning is integrated with corporate strategy. Overall, only 32 percent of companies claimed this integration. This finding refutes the popular notion that ambitious and entrepreneurial individuals are the primary force behind corporate innovation. Nearly 60 percent of early adopters of technology state that IT projects are primarily business-driven. The study reveals that most companies appear to recognize the potential of early adoption, stating they would prefer to adopt technology earlier in its maturity lifecycle than they do now (see figure 4). Not surprisingly, companies continue to examine disruptive and leading-edge technologies that may change the competitive landscape in their market. In fact, 43 percent of the companies surveyed say they are evaluating disruptive technologies for investment. Innovation is delivering results: Nearly 70 percent of companies that spend the majority of IT resources on innovative IT solutions experienced higher growth than their key competitors. Planning is key to generating such positive results. The study found that 54 percent of early adopters of technology say business and IT planning is key to enabling business results a considerably higher figure than mature adopters. Figure 4: Companies typically invest in mature technologies, but many would prefer to adopt earlier in the technology lifecycle WHICH OF THE FOLLOWING BEST DESCRIBES WHEN YOUR COMPANY INVESTS IN IT? CURRENT IT ADOPTION STAGE 21% 31% 33% AT WHICH STAGE SHOULD YOUR COMPANY BE INVESTING TO MOST EFFECTIVELY ACHIEVE ITS STRATEGIC GOALS? DESIRED IT ADOPTION STAGE 35% 35% 24% 8% 7% 5% 1% Leading edge Early adopter Early maturity Mature offering Late adopter Leading edge Early adopter Early maturity Mature offering Late adopter Source: A.T. Kearney

11 10 Innovative and agile companies will continue to outperform static businesses by effectively offering new products or means to serve their customers. How can companies reap those rewards? They can begin by formally and consistently including IT management and the business in an iterative planning process. When business and IT executives collaborate with integrated planning processes, they work from a more intimate understanding of how technology can help their organization create true business value. Businesses should create a corporate culture and evaluation process that rewards the innovative use of IT to create new business opportunities. In addition, companies must become skilled in evaluating and making sound investment decisions on disruptive technologies that support their corporate strategies. The ability to assess how nascent technologies will affect a company s value chain and competitive position will be crucial. The best businesses will be adept at drawing technology landscapes that put emerging technologies into the context of their corporate strategies. This will help identify both the potential benefits and any adoption or technology issues (such as lack of standards or complexities) that could present a roadblock to business value. After developing the technology landscape, a company should evaluate its options against the high-level business benefits the technology will generate and the company s ability to implement it (see figure 5). What strategic option a company pursues is influenced by what benefits the technology will produce and how successfully a company can deploy it. Figure 5: Adoption strategies depend on a technology s position in the matrix Ability to deploy the technology High Low Low License or sell technology to company in other vertical Spin off or develop as additional service offering Continue to monitor technology and benefits Do not invest Pursue full-scale implementation of technology initiative Continue to improve competency Leverage competency as a barrier to entry against competition Invest heavily to develop competency Pursue initial scaled pilot Outsource or partner to pursue innovation and technology implementation Potential benefit from adopting the technology High Source: A.T. Kearney

12 11 Finally, potential projects should be evaluated against specific financial and strategic benefits. Business cases for adopting new technologies require great care and rigor. A.T. Kearney client experience indicates that organizations that failed to realize business value from IT investments often began with flawed business cases. Consider a major energy company with decentralized IT systems in hundreds of locations; the structure was costly and provided limited functionality. The organization used a highly customized legacy application that ran on different platforms for customer management, collections, pricing and distribution. With a solid business case and close collaboration between business and IT leaders, the company has reduced IT costs and added new business capabilities investing in an innovative solution that includes a CRM application, a centralized data repository, fleet routing, mobility and customized demand forecasting applications. This investment will enable the company to fulfill a strategic mandate: to cost-effectively deliver enhanced service to customers. The company will realize tens of millions of dollars in annualized operational cost savings with a payback period of less than 24 months. The company also benefits from a standardized package and business processes and is building the platform for future competencies. The new technology is also a major force in the company s shift from a product-focused to a customerfocused company. Armed with strong business analytic tools, optimized processes and a modern centralized IT architecture, the organization will assume a leading cost and service position in the industry. STRATEGIC MEASUREMENT: ASSESSING BUSINESS RESULTS Integrating business and IT needs must carry through to the end: measuring the business results. Companies that excel in this area gauge business value using methods that parallel the specific goals of an IT initiative and the characteristics of its portfolio segment (see figure 6 on page 12). In fact, measurement must be fully integrated into the process from planning to deployment. Our research reveals that return on investment (ROI) is the primary measurement used by organizations to measure business value. The problem with consistently using ROI to measure business value is that all projects are not created equal. Different projects require different methodologies and approaches to measuring business value. The study respondents listed many reasons for not measuring the business value generated by IT investments. One stated, We don t have time. We move through projects so fast that there isn t time to measure because they re on to another project. Another noted, Our business strategy is to focus on customer relationships, which are not easily measured. Clearly, measuring success in IT is not easy largely because it is often difficult to quantify the most critical inputs and outputs. But consistent measurement will force businesses to zero in on value and ensure that IT and the business work well together, while creating an IT organization that delivers effective business solutions. One key to effective measurement is matching IT to business goals. Again A.T. Kearney s IT portfolio model can be a strategic tool. For instance, when the business value of an

13 12 IT investment is reduced cost, the best method to measure the success of this type of investment is one that concentrates specifically on that goal. In addition to ROI, measurements such as total cost of ownership, net present value and internal rate of return effectively generate numbers that track this investment over time and against the cost of capital used by the organization. When IT investments are meant to facilitate growth and enable business processes, measurements need to focus more on building value into operations than on decreasing costs. One measure to gauge this is the economic value added (EVA) tool, which captures the value to the business after the cost of capital. EVA is profit the way shareholders define it. It explicitly recognizes that when managers employ capital, they must account for it. Other measures for growth initiatives, often specific to the business case, can be activitybased costing, cycle times, inventory carrying costs and customer satisfaction, to name a few. Innovative or strategic projects also need to be supported with different models. Measures such as real options can help evaluate breakthrough innovative projects because they account for business uncertainty and effectively communicate strategic benefits and flexibility. Real options treat IT investments as a stock option. In finance, a call option gives the holder of that option the right, but Figure 6: Different projects require different measurement approaches SAMPLE FOCUS CATEGORY SAMPLE BUSINESS DRIVERS MEASUREMENTS ONGOING OPERATIONS Cost reduction and operational excellence Minimize costs Provide platform for value-enabling initiatives Provide standardized functionality for commodity and transaction processing applications Return on investment Total cost of ownership Net present value Internal rate of return Payback period VALUE- ENABLING IT Growth and enabling business Improve cycle times and output for organizational functions Reduce activity and unit costs across functions Optimize operations along the value chain Provide platform for improved product and service offering Generate improved organizational capabilities Economic value added Activity-based costing Cycle times Customer satisfaction Innovation for strategic advantage Provide sustainable advantage to the organization through innovative products, services or processes Create difficult-to-replicate strategies and barriers to entry through IT Increase switching costs for customers Real options Customer wallet share Market share Industry concentration Source: A.T. Kearney

14 Innovative and agile companies will continue to outperform static businesses by effectively offering new products or means to serve their customers.

15 14 not the obligation, to purchase the stock at the set price of the held option within a certain period of time. Similarly, real options account for strategic unknowns by recognizing that investments are not always made in full at one time. By accounting for this deferral option, companies can better evaluate flexibility and the strategic alternatives an IT investment can create. For example, Bell Canada is working to provide superior service to its customers. One IT initiative is a customized solution that will enable its customer service reps to handle inquiries from any of Bell Canada s eight million customers on any product using a single infrastructure. This solution poses technical challenges as well as uncertainties about the needed capabilities to implement. Bell Canada, using real options to drive the investment analysis, launched the system as a pilot aimed at cross-selling Bell Mobility services to a targeted group of 100,000 Bell Canada customers. With an initial investment of more than US$6 million, the company will determine whether it can create a fully scalable model that improves customer service before increasing the size and investment in the project. This approach provides valuable organizational learning and constitutes a real option on both expanding the scale of the integrated offering and including other Bell Canada divisions. Finally, the A.T. Kearney study found an additional benefit to measurement. There is a direct correlation between measurement and the business perception of IT. Eightytwo percent of those surveyed who consider themselves successful at measuring the value of IT perceive the value from IT relative to their competition as high compared with two-thirds of total survey respondents. THE NEXT WAVE: STRATEGIC AGILITY Tomorrow s technology will help companies craft real-time customer-focused strategies that offer flexibility and agility. To respond quickly to customers and operations as the marketplace or business conditions evolve, companies are implementing business analytics, integration architectures and other disruptive technologies. The study reveals that 62 percent of companies are implementing analytics, while 75 percent are implementing web services. In addition, 72 percent of innovative companies are investing in customer relationship management. The more widely these technologies are used, and the more effective they become at solving business issues and creating flexibility and agility, the greater the gap between the haves and have-nots will become. Survey participant, Occidental Chemical Corporation (OxyChem), illustrates how an old-line manufacturing company can improve its competitive positioning by focusing on the customer. With 5,000 customers and 10,000 ship-to locations, OxyChem needed multiple e-business channels to satisfy the diverse needs of its customer base. For its largest customers, OxyChem used ERP (enterprise resource planning) technology that enabled production processes at customer sites to directly trigger replenishment actions within its order fulfillment operations. Customers that cannot take advantage of direct ERP connectivity have an alternative solution: OxyChem installs sensors at customer sites that monitor tanks holding raw materials and triggers a purchase order when inventory reaches an appropriate level. The manufacturer also created a web portal that enables customers to place orders, check order status and track shipments, even to

16 15 the extent of monitoring specific railcars. OxyChem has realized several business benefits as a result of using the e-business channels, integration platforms and the integrated supply chain with its customers. The company has reduced inventory levels and working capital, increased staff productivity, increased the accuracy of production scheduling, and enhanced the efficiency of its distribution planning. The additional services provided to its customers online capabilities have improved its relationships with its customers, which in turn led to both increased wallet share and profitability. OxyChem has responded to a snowballing trend that shows no sign of slowing: rapidly changing customer demands and business environments. Flexible business models that permit outsourcing and specialization throughout the enterprise and across its value chain are becoming mandatory. These real-time models will allow companies to react more quickly and appropriately to business issues and marketplace changes. Consider also FedEx, which recently redesigned its customer call center to ensure that its 3,000 customer service representatives, spread across 16 call centers, can provide superior support to the 300,000 customers who call each day. Using a team of both business and IT executives, FedEx invested in IT that would provide customers with a single point of access for their shipping needs. A new CRM application was the centerpiece of the IT architecture, which allowed FedEx to pursue three primary goals. First, FedEx can identify and understand its customer in other words, it establishes a customer profile. Second, call center representatives can access the customer s interaction history, giving the rep insight to past calls and experiences with FedEx. Finally, the solution improves the customer experience by integrating the call center application with FedEx s systems for tracking packages and recording pickups. This information links the customer, field operations, and the products and services providing the company with a real-time, 360-degree view of the customer. As a result, the bar for the competition is considerably higher today. FedEx cites several benefits, including improved intelligence and customer data, reduced handling times for calls (a substantial savings given the daily 24-hour call volume), increased customer satisfaction and additional business. How can other companies create this agile, real-time organization that places the customer at the center? The first step is to identify the points across the value chain where access to information will provide value to the customer or the business. Evaluating whether the information needs to be captured almost instantaneously to support day-to-day business operations or on a less frequent basis to enhance the strategy development process is vital. Once these areas and information delivery needs have been established, a company can begin to evaluate what technology building blocks are needed to support this model. However, delivering the information is just half the battle. Once these building blocks are established, it will be necessary to define the processes that will use these technologies in order to effectively gain access to, evaluate, and act on the delivered data.

17 Conclusion Today s businesses face a constantly changing landscape that will force closer collaboration between the business and IT departments. A solid partnership between business and technology will not happen overnight; there are too many changes in strategy, culture, organization and processes involved. Yet it is a critical shift. Information technology has moved beyond support status to become a key contributor to the value of a business. As such, those who are responsible for technology strategies must take an active part in strategic planning and day-to-day execution. Companies will continue to be under pressure to generate value via an IT portfolio that paves the way for operational efficiencies, business growth and innovation to increase competitive advantage. This can only be realized through strong integration that places business value at the center. Collaborative customer-centric strategies, supported by technology chosen for the return it will provide, will become the rule rather than the exception. The road to these new business models and strategies is not easily traveled. But neither can it be avoided. Companies that begin taking their first steps toward strengthening IT and business partnerships and move strategically toward tomorrow s more flexible strategies will be favorably positioned for continued success and growth.

18 A.T. Kearney is an innovative, corporate-focused management consulting firm known for high quality, tangible results and its working-partner style. The firm was established in 1926 to provide management advice concerning issues on the CEO s agenda. Today, we serve the largest global clients in all major industries. A.T. Kearney s offices are located in 59 cities in more than 35 countries in Europe, Asia Pacific, the Americas and Africa. A.T. Kearney is the management consulting subsidiary of EDS, the leading global services company. EDS provides technology strategy, implementation, business transformation and operational solutions. AMERICAS Atlanta Boston Buenos Aires Caracas Chicago Cleveland Detroit Los Angeles Mexico City Miami Minneapolis New York Plano San Diego San Francisco São Paulo Silicon Valley Stamford Toronto Washington, D.C. EUROPE Amsterdam Athens Berlin Brussels Copenhagen Düsseldorf Frankfurt Geneva Helsinki Istanbul Lisbon London Madrid Milan Moscow Munich Oslo Paris Prague Rome Stockholm Stuttgart Turin Vienna Warsaw Zurich ASIA PACIFIC Bangkok Beijing Hong Kong Jakarta Kuala Lumpur Melbourne New Delhi Seoul Shanghai Singapore Sydney Tokyo AFRICA Johannesburg For information on obtaining additional copies, reprinting or translating articles, and all other correspondence, please contact: A.T. Kearney, Inc. Marketing & Communications 222 West Adams Street Chicago, Illinois U.S.A fax: insight@atkearney.com Copyright 2003, A.T. Kearney, Inc. All rights reserved. No part of this work may be reproduced in any form without written permission from the copyright holder. A.T. Kearney is a registered service mark of A.T. Kearney, Inc. A.T. Kearney, Inc., is an equal opportunity employer. EDS is a registered mark of Electronic Data Systems Corporation.