The importance of IT strategy for SMEs – A detailed guide
"IT Strategy" - The term is a buzzword these days in business circles.
And if you are in one, you would probably know what that term means. But if you don’t, it’s alright. Because you are not alone. You may ask a hundred business leaders about the IT issues that hit their small businesses hard, and you would get answers ranging from ransomware to denial-of-service attacks, lack of reliable security, and safety of the Internet of Things, and devices.
But they’ll miss out, most certainly, on the one thing which is capable of preventing the smooth functioning, safety, and security of systems in their companies; a well-coordinated and aligned IT Strategy.
So, let’s put the bottom line up front!
If IT Strategy isn’t at the heart of your business model, you are doing it wrong.
IT is no longer a minor supportive department in a business. In today’s world, businesses are heavily dependent on information technology to survive and thrive. As cybercrime is becoming more prevalent, businesses need to be even more confident about their integral IT solutions, which means that IT teams, CIOs, and CEOs need to work together to develop coherent strategies for the future. Interestingly though, despite the evident need for an agile IT strategy for every business, it’s overlooked most of the time.
That’s where this article chips in. To delve in-depth as to why an IT Strategy is vital for SMEs and how to develop one.
Let’s begin with the basics!
What is an IT Strategy?
Where business strategy sets out the business objectives and guidelines on how to achieve them, the IT strategy is hardly any different except that it relates explicitly to IT-related tools, skills, and techniques. Just as marketing and sales strategies are an integral part of a business plan, SMEs must plan how they intend to manage their technology to improve business now and in the future.
The IT strategy forecasts allocates, and tackles IT budgets and caters for IT issues such as networks, programs, facilities, services, integration, development, and more. It must be noted that an IT Strategy should be specific, but not prohibitive of beneficial change.
This raises a fundamental question.
What are the Characteristics of a Good IT Strategy?
- Adaptive and Constantly Updated
Just as your business strategy is reviewed and revised every so often, your IT strategy must be updated regularly to make it consistent with ongoing changes and the business strategy. - Coordinated and Aligned
Your IT strategy must complement other departments’ strategies. IT, unlike HR, is not profitable in itself, but it operates to enhance and safeguard your money-making efforts. You may consider inviting the heads of various departments to your IT Strategy planning meetings to ensure that all efforts are appropriately coordinated and aligned. - Documented
It’s not enough to simply meet with your IT staff or consultants, give verbal directions to CIOs on what you want for your business, and then expect to have all the IT services you need. Things you decide on in your IT strategy must be recorded in black and white.
Why is IT Strategy Important for Businesses?
IT Strategy Allows Farsightedness
Stephen Covey coined the famous phrase “Begin with the End in Mind.” This phrase reflects the true spirit of all strategic planning processes, including IT Strategy. If you are a small business owner and your business and IT strategy doesn’t include a plan of what your business is going to do in the next 3-5 years, do you even stand a chance of getting there?
IT Strategic planning is a process that gives you a wholesome foresight to IT-related issues. It allows you to think about what is ‘Important’ rather than what is ‘Urgent.’ Perhaps most importantly, it will enable you to set up a mechanism to achieve what is essential as per your Business Strategy and would assist and complement your overall business model.
IT Strategy Helps Decentralised Decision-Making
One of the most challenging tasks to delegate as a CIO is decision-making. Do you feel that despite your best efforts, you seldom get your employees to think the same way that you do? If so, a well-defined and descriptive IT Strategy is the solution. It’ll give you a way to tell your team what you’re thinking about. Also, it sets out a framework for decision-making.
So, when it comes to your subordinate deciding on your behalf, he/she can use the strategic plan that you already laid out in your IT strategy. They can counter-check their decision against the IT Strategy and verify whether their decision is in line with the plan (the organisation’s goals) or they are deviating from it.
In short, IT Strategy empowers your employees to make decisions and move forward without the need to consult or involve you at every step and in every decision. This, in turn, allows your business to be more adaptive, agile and progressive.
IT Strategy Allows Businesses to Cope with Change and Contingencies – Thus Avoiding Unforeseen Situations
Remember! Change is an unchangeable law in IT. So those who are best prepared to change can leverage it to their advantage. Others, unfortunately, are destined to doom. Take the example of Kodak and Canon, for instance.
Kodak, the world’s biggest film company at one time, failed to keep up with the digital revolution. Kodak stuck with its age-old camera film business, which it had been doing for well over a hundred years. Canon, on the other hand, welcomed the change and switched to digital. Result? Kodak filed for bankruptcy in 2012 while Canon went on to become a multi-billion-dollar enterprise, outliving its giant competitor.
This is in no way suggesting that an IT strategy was all that Kodak needed to avoid the fall, but it would have initiated future-driven thinking and corresponding initiatives which the company lacked.
IT strategy encourages future planning, ensuring that your business remains consistent with technological innovations. It also enables us to be best ready for unexpected changes.
IT Strategy Sets Parameters for Creative Thinking
When we try to develop solutions to IT challenges, there is sometimes too much room for a blank slate. Think about building a house. Most of us don’t start with a stack of bricks and a few bags of cement. We’re relying on a builder who has several floor plan options, to begin with. When we have a plan, we can have discussions about what we like and what we don’t like. We will have the opportunity to discuss the various house features and what purpose each room will serve. In short, a house that meets our needs begins to take shape soon—the same analogy applies when building your IT Strategic Plan.
Just like the multi-floor plan, IT strategy gives us a basic understanding of the current and future goals of the company. It gives direction and ensures that all stakeholders are on the same page. It also helps in keeping the focus right and sifting essentials from non-essentials.
IT Strategy Addresses the Issue of Shadow IT
Many organisations have seen a significant increase in ‘Shadow IT’ in recent years with the adoption of cloud-based applications and services.
In short, Shadow IT involves the use of any hardware or software without the consent or knowledge of the organisation’s IT Company/Department.
For instance, an employee may find a better file-sharing application to the one officially allowed. Once s/he begins to use it, the word may spread to other members, increasing the number of users. Now, this file-sharing app has become a Shadow IT for that organisation.
An IT Strategy can make it possible for the organisation to identify why Shadow IT exists and to address the need by incorporating it into the overall IT Strategy objectives. Often a great way to deal with Shadow IT is to recognise the need and gain support for bringing it under the authority of the central IT organisation.
An IT Strategy helps you Communicate your Intentions to Senior Leadership
IT strategy is a useful tool for communicating your intentions to high-level management. It allows you to convey your business objectives to C-level executives with a documented plan. Likewise, it enables senior leadership to review that your efforts are in line with the company's vision and outlines what the IT department is doing without getting overly involved in day-to-day operations.
How to Develop a Coordinated and Aligned Business IT Strategy?
Information Technology plays a significant role in global businesses, causing disruption to industries and altering how businesses are conducted. However, the process involved in the development of an effective business-IT strategy can be complicated. It involves in-depth analysis and input from different business areas to ensure a holistic view of the organisation.
According to a notable global online study by McKinsey Digital, a large percentage of companies have achieved minimal success in their initiatives to digitise their technology management and business models. Mainly because their IT Strategy wasn’t aligned with the Business Strategy. Remarkably, this aspect of IT strategy vs business strategy is evident even in some of the most advanced industries.
Below is a detailed guideline on how an efficient IT Strategy that supports your corporate objectives and aligns with your business strategy can be developed and implemented.
1) Ensure IT Strategy Objectives Align with the Business Strategy Goals
Your business operating model incorporates the way different parts of your business fit together. Its main objective is to ensure that everyone in the organisation focuses on the value that the company seeks to create. You cannot articulate your business irrespective of its size to deliver the desired value unless your business model is crystal clear across the board. Therefore, CEOs and CIOs must be on the same page about how the business would run as a whole before any strategy can be formulated. In many cases, CEOs and CIOs tend to have different visions of what the business should look like. This leads to diverging IT and business functions, which end up in misaligned and often conflicting strategies.
Major Points of Divergence Between IT and Business Strategy
A business leader should consider the following – these points create a bone of contention between the Business Strategy and the IT strategy:
- Investing in upgrading technology in areas where the business does not intend to grow
- IT is not aligned with growth plans thus creating issues in future design and technological requirements
- Setting an incorrect priority for projects
- Mergers or acquisition planning resulting in IT upgrades, or technology refreshes being deferred
- New business ventures that may not be adequately supported by IT
- Lack of transparency in budget planning
- Business strategy does not comprehend the IT budget demand and its significance concerning regular IT maintenance, upgrades, tech debt, capacity, and resource acquisition
So, What Should You Do as a C-Level Executive?
As an executive or senior manager, you must be willing not only to understand the business goals but also the implications of IT for the business. This will allow you to encourage IT to translate their ideas and concepts into your business language. A good practice would be to schedule weekly or bi-weekly IT strategy and business alignment meetings to develop review plans and evaluate your strategy. Continually, you must ensure that the IT strategy is in sync with the business strategy.
2) Get the Right People Involved
One of the major differences between companies that successfully align business with IT and those that fail is the role of senior leadership in IT-related decision-making. As a business leader, you need to be directly involved in the decision-making process when it comes to major IT initiatives.
Senior business executives and managers need to meet with IT managers regularly to discuss strategies that encapsulate both functions. It is so much easier for employees to follow a business IT strategy when executive management is personally involved.
Remember! Getting the right participation also includes getting external IT and business experts involved in your strategy. It is not advisable to use only in-house talent for business-IT coordination. External parties bring a range of critical aspects to the table, including objectivity, better expertise, a different perspective, access to more resources, and creative cost-reduction approaches.
3) Set Clear Objectives
Not so long ago, IT-related initiatives used to be knee-jerk, vague and lacking in a constructive direction. Today, however, an efficient business IT Strategy includes carefully planned objectives aimed at developing different business capacities, such as product/service innovation, product/service delivery, department-wide collaboration, and customer care. You should ensure that these objectives are broken down into smaller initiatives that are interlinked with the business initiatives, thus, binding different departments with a mutual interest.
Formalise your objectives in such a way that they can be adapted, accelerated, reconfigured, or cancelled based on the overall business strategy. Well-defined and realistic goals provide IT and business managers with a unified vision and direction. This, in turn, challenges them to think and move beyond current operations to achieve the set goals and objectives.
IT objectives should be laid out, leaving no ambiguity about the What, the Why and the How. When business and IT initiatives are tailored to concisely laid out objectives, it is easier for leaders to track and guide key strategic goals over the implementation period of the plan.
4) Appropriate Budget Allocation for the Implementation of IT Strategy
The different ways in which you can apply technology are among the challenges of implementing an effective IT strategy for your business. This makes the allocation of the IT budget a real deal for businesses. Therefore, determining how to allocate your IT budget is of vital importance for your IT business strategy.
Inspired? Need Help in How to Proceed?
Numata is a reliable IT strategy and advisory firm that specialises in developing IT strategies for your business. We bring forward the best practice-based frameworks and methodologies to align your IT strategy with your business objectives to ensure that it covers all the necessary components to be successful. Get in touch and let us find the best solution for your business.
The Upshot
IT strategy is the hallmark of any business and needs to be given due importance. Overall, the development and implementation of an effective IT strategy and business strategy is an essential part of every organisation in the long term. Although there can be no definitive business IT strategy, the above-mentioned best practices are some of the key success factors in linking the IT strategy with your business model. As a business leader, learning to implement them well ensures that your small business is well-positioned to address the competitive business environment.