Structure in Threes: IT Business Models
January 28, 2014 Leave a comment
Yesterday on the way back from client’s site I started pondering the intersection of Service Quality, Brand Value, and Business Models with regard to Information Technology. Traditionally, IT functions had been focused around a product development model with operations being dragged in tow as a little more than after market support. The only difference was that IT had a captive market or so the unconscious bias appears to be within these organizations. As the IT industry has aged, other goal expectations were placed upon these organizations. These ranged from being the gatekeeper to precious information, the controller for allocating technology & resources, and the integrating force between other parts of the organization. Whether it is possible for one function to successfully execute on all three missions is a topic for another post.
These expectations struck a nerve with me as I was reading Step Guide for Building a Great Company . I have been researching business strategy, models and processes for most of my career. As I read through the first few pages I wondered if IT Functions were not using the wrong business model. In the past decade many IT functions are desperately trying to change their culture to a service oriented business. Initiatives such as ITIL, COBIT, and SOA seek to inject a service mindset. I think the objective is a laudable. Having experienced a slightly less than customer / service oriented environment decades ago (a story for another time over a beer).
However, the typical service model that is put in place is one for a stabilized or mature business. A business that has a standardized set of services that are being optimized, not a service that is constantly evolving which has been the nature of the IT function over the past several decades: Mainframes, PC/Workstations, Network, Internet, and now Cloud and BYOD. This would not be considered a stable and mature industry as the technology keeps changing. The consider as the technology keeps changing new services are being either asked for or developed constantly.
With that fact I wonder if the business model IT functions should use is that of a Startup or possibly a bifurcated model that has service groups start out in incubators and move into optimization models as the service matures. This is very similar to the extension’s I developed for another employer with regard to managing business portfolios. I had based much of the initial work on The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise adding another horizon and much more recently figuring out how to tie each horizon portfolio together using Real Options and Cluster Analysis.
In this recent expansion new services in ideation are considered a new business opportunity or new technology opportunity. This determines if they are a Horizon 3 or Horizon 4 portfolio member. As the internal market/business develops or the technology becomes understandable and stable enough to pilot these opportunities move onto the next portfolio where different operating rules and metrics are applied to manage these.
The result of using such a model makes the IT Function vertically integrated business incubator going from Founder & Angel Investor, to Startup & Venture Capitalist, to an stabilized operating line of business. Which leads to yet another simulation model to build for my clients and possible discussion at next April’s Engineering Conference.