Every company is a technology company

1. IVI in a world where every company is a
Technology company
Ralf Dreischmeier, Global IT Practice Leader
Dublin, September 24th, 2013

2. To err is human...
"What could our company possibly do with electric games?"
William O t
Willi
Orton, CEO of Western Union,
fW t
U i
refusing to purchase A. Graham Bell's telephone
(~1876)
"I think there is a worldwide market of about
five
fi computers"
t
"
Thomas Watson, CEO of IBM
"All that could be invented has been invented"
Charles Duell, Manager of US patent office
"Future computers will weigh only a ton and a half maybe"
Popular Mechanics, anticipating the development of
Information Technologies
(1949)
"Horses will always remain
while automobiles are but a novelties that will disappear"
CEO of the Michigan Savings Bank, advising Henry Ford's
lawyer against investing in the automobile industry (1903)
"Airplanes are amusing gadgets, but without
any military interest"
y
y
Maréchal Ferdinand Foch, in charge of the French military
strategy and future war commandant
(1911)
"There is no reason why p p would ever have
y people
a computer at home "
Ken Olsen, CEO of Digital Equipment
(1977)
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2
onsulting Group, Inc. All rights reserved.
A
(1899)
(1943)
"A 640K memory should be enough for everyone"
640K-memory
Bill Gates
(1981)
"IT doesn't matter, it is becoming a commodity
and therefore... does not provide competitive advantage"
Nicholas G. Carr
(2004)
...to not l
t
t learn from it can be fatal
f
b f t l
Source: Press research, BCG
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
1

3. Every company is becoming a Technology company
Three ways in which Technology is driving value
Size of
impact
Value x 1-∞
Value x 5-10
3
2
1
Cost reduction
• Reduction of unit cost
of Technology services
• Commoditisation and
externalisation of
Technology
Business
transformation
• Enhancement of
business processes
• Improved efficiency,
automation and agility
• Enablement of new ecosystems
and new business models
• High innovation leading to
creation of new products and
services
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2
onsulting Group, Inc. All rights reserved.
A
Value x 5-10
Business model
innovation
Nature of impact
• Focus on Tech cost/operations
• Improvement in agility
• Drawing on individual, commodity
services
• Focus on business strategy
• Drawing on full capabilities as part
of wider transformation
• New business products / services
Source: BCG experience, cloud analysis
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
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4. Technology intensity in majority of businesses is increasing
Change in Tech spending ( ) [
g
p
g (%) [2011-2012]
]
10
Tech spending growth outpaces Opex
Professional services
5
Utilities
Energy
Banking and FS
Healthcare
Telecomms
Industrial electronics
Construction
Pharma
Insurance
Food & Beverages
Consumer products
Industrial manufacturing
Transportation
Media
Education
Retail and wholesale
Chemicals
Government—nat./internat.
0
Government–state/local
Opex growth outpaces Tech spending
-5
-5
5
0
5
10
Change in Opex (%) [2011-2012]
Source: Gartner IT key metrics data (February 2013) for 2011-2012
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
3
Copyright © 2012 by The Boston Co
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onsulting Group, Inc. All rights reserved.
A
Software & Internet services

5. Mature Technology management capabilities are the only way
to maintain competitive advantage over time
Manage & shape b i
M
h
business
systems strategically for
adaptive advantage
Detect, capture, and exploit
information patterns for
adaptive advantage
Position
Capability
C
bili
Set and manage
human context for
adaptive advantage
strategy
Leverage new social and
ecological context for
g
adaptive advantage
Simulation
advantage
Source: BCG
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
Experiment for
adaptive advantage
4
Copyright © 2012 by The Boston Co
2
onsulting Group, Inc. All rights reserved.
A
Adaptive

6. Mature Technology management capabilities are the only way
to maintain competitive advantage over time
Manage & shape b i
M
h
business
systems strategically for
adaptive advantage
Detect, capture, and exploit
information patterns for
adaptive advantage
Position
Capability
C
bili
Capability
Set and manage
human context for
adaptive advantage
strategy
Leverage new social and
ecological context for
g
adaptive advantage
Simulation
advantage
Source: BCG
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
Experiment for
adaptive advantage
5
Copyright © 2012 by The Boston Co
2
onsulting Group, Inc. All rights reserved.
A
Adaptive

7. And advantage is increasingly valuable
Cost of being wrong over time
Diverging performance between top and
bottom firms
firms...
...has increased the
cost of being wrong
Difference in operating margin btw. top and
bottom quartile(%)
Average operating margin across industries1(%)
60
40
40
Copyright © 2012 by The Boston Co
2
onsulting Group, Inc. All rights reserved.
A
59
20
20
0
1950
1960
1970
1980
1990
2000
2010
0
1950
Top quartile
1960
1970
1980
1990
2000
2010
Bottom quartile
1. Evolution of average operating margin of top and bottom quartile firms (ranked based on margin) across industries
Source: BCG
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
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8. Capabilities providing advantage are changing
Importance today vs change in importance in the last 4 years for all Critical Capabilities
Demand &
Supply
Management
Business
Process
Management
Avg chan in impor
nge
rtance since 2010
20%
Project Portfolio
Planning
IT Leadership &
Governance
DSM BPM
PPP
CFP
10%
RDE
CAM
TCO
IM
BOP
PAM
TIM
BGM
SD
EAM
SAI
AA
SRC
0%
UED
ODP
BAR
RAM
KM
SUM
ITG
PM
RM
FF
PPM
Strategic
Planning
SP
BP
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onsulting Group, Inc. All rights reserved.
A
Capacity
Forecasting and
Planning
SRP
-10%
10%
UTM
-20%
20%
low
Supplier
Management
g
intermediate
User Training
Management
g
User Experience
Design
g
Knowledge
Management
g
high
Importance today (2013)
Source: IVI, BCG Factbase 3.0 (60+ data points, aggregated results for all industries)
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
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9. Summary – the so what?
Technology services becoming cheaper and more easily accessible
2
Technology intensity increasing
3
Technology becoming key enabler for new business models
gy
g y
4
Competitive advantage in Technology maturity becoming essential
5
CIO priorities will be shifting
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
Copyright © 2012 by The Boston Co
2
onsulting Group, Inc. All rights reserved.
A
1
8

10. What to do on Monday morning?
Summary of implications for CIOs and their IT departments
• Run an executive assessment in order to understand where you are vs. your industry
y
y
y
• Have a discussion with your CEO about how s/he envisages the future role of CIO
within your organisation
y
g
• Define long term development roadmap for your Technology management capabilities
Copyright © 2012 by The Boston Co
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onsulting Group, Inc. All rights reserved.
A
• Scope initiatives for immediate next steps, obtain budget and kick off implementation of
the roadmap
• Focus on outcome oriented metrics and track progress of benefit realisation
• Repeat the exec assessment every y
p
y year to track p g
progress
IVI@bcg.com
IVI@b
130924 Where every company is a technology company v1.0-PL-SD-BER (abridged).pptx
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11. Thank you
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