When is a company too small to develop an IT strategy?
“We’re not a big company, so we don’t need an IT strategy. We have a website, an ERP system and a web shop, and Louise is in charge of all that.”
I have heard variations of this theme many times when meeting with small and medium-sized businesses. I admit that it can seem reasonable to have this perspective, but this line of thinking is based on an outdated concept of the role that IT plays in a company.
Whatever a company’s size, the senior management must understand that IT has an enormous influence on a company’s development and growth. IT must never be reduced to something that just keeps the existing system up and running – IT has to simultaneously support and advance the company. IT is the business, and the business is IT. This is why most companies benefit from having an IT strategy.
Many small and medium-sized companies are surprised to realize how many systems and digital processes are in play. They are critical to the business and this is why just about every company would benefit from strategic attention on IT from the top management.
In order to spell out why having an IT strategy is so essential to both big and small businesses, here are three problems that come with not having an IT strategy:
- Without an IT strategy, decisions involving IT are often made totally or in part without taking into account strategic business conditions or existing IT architecture. This is problematic for a number of reasons. Most of all there is a risk that inappropriate choices are made in the IT area, which do not support or advance the business, and which can also cause serious risks for the business.
- Without an IT strategy, the technological choices are opportunistic, and decisions tend to be taken based on short-term cost. Making the wrong choice in technology ends up being expensive in the long run and may block the way for reaching business goals and realizing further digital ambitions.
- Without an IT strategy, it is not possible to carry out meaningful IT governance. It may be possible to develop a process for prioritizing projects and investments in the IT area, but without a clear strategy it can all seem arbitrary.
“IT has to simultaneously support and advance the company. IT is the business, and the business is IT. This is why most companies benefit from having an IT strategy.
When do you need to have an IT strategy?
The three points listed above explain why, no matter what size a business is, it benefits from having an IT strategy. At the very least, this will create clarity around the framework and provide a nuanced understanding of the business value that IT helps to realize.
In addition, it is important to emphasize that an IT strategy can deal with many areas, and that an organization or company can certainly have multiple IT strategies. This could be a general IT strategy that lays down the guidelines and direction for the entire IT area, and it could be specific strategies for data centers, sourcing, software development, and so on.
The figure below shows our starting points we use at IT ADVISORY when discussing the needs of our clients and an optimal IT strategy for them. Any company may have specific ambitions and challenges, but all of them fall under at least one of the following six categories.
Small businesses that have just started often benefit from having an overall framework. This could be in the form of a number of strategic principles for IT purchases, as well as selecting technologies and partners strategically. A classic challenge for startups is when the technologies chosen actually impede business progress. This can happen in the initial phase, when they are too complex or expensive, or at a later phase when it turns out that choice of technology is unsuitable and prevents the business from scaling up.
In our opinion, it is especially important that small and medium-sized enterprises ensure that the IT strategy is the responsibility of top management, and preferably the board of directors. This prevents problems that can arise when the senior management and board are blind to the inappropriate decisions, bad investment and business risks that come with non-decisions. By definition, the duty of a board of directors is to supervise the general and strategic management, and IT falls under this category. It can no longer be considered to be an operative unit and a set of tools. IT is business.
From the report “SMB Boards in the Digital Era” (in Danish only), published by Aarhus University, we know that there are huge challenges in making senior management and the board responsible for IT and digitalization. Other research indicates that big changes are more successful and are executed faster when the board and the management are both at the forefront. Although in many cases a shift from “no focus on IT” to “focus on IT” should have taken place years ago, whenever it does happen, it is a major change for the business.
Does this describe your business?
I have put together 6 things that indicate that your company could use an IT strategy:
- IT is something that one individual or just a few people are responsible for, which means that it is not usually associated with strategic business decisions.
- Choosing technology usually comes from specific needs. Technology and systems are often selected based on simple technical evaluations and not so much from strategic business assessments.
- The CEO does not have a position on IT – that is the responsibility of others. Responsibility for IT may have been handed over to a CFO as a cost center to be optimized.
- There is not a clear, shared vision of what IT is and what it could and should be for the business.
- IT is not strategically developed within the company, and the maintenance and operations of IT is uncritically outsourced to an external IT vendor.
- To put it bluntly, when it comes to IT, all too often there are layers of incompetence. Among middle or top management there is no deep understanding of how IT should be run or planned, and this means that decisions are often made based on gut feelings or individual preferences
If one or more of these six indicators could describe your company, then I recommend that you get some help and establish an IT strategy, either with IT ADVISORY or with another independent IT advisor.
It is very important to choose an independent advisor, so that you do not end up with a vendor who is influenced by personal interests rather than yours. An IT strategy is about your business. An advisor cannot facilitate, or evaluate the business holistically, or inspire and challenge the management while simultaneously pursuing personal interests.
When IT is developed strategically within your organization and you have established an IT strategy, you are better positioned than most others.
Remember that strategies have to be carried out by people working under pressure on a busy workday, so it is important that following the strategy is made focused, concrete and meaningful. Sune Dybdal and I have already written an article on this subject.
Without preparing in advance, are your key employees able to explain in one or two minutes, what the IT strategy means as far as their work and how it contributes to the business?