• October 20, 2015

Infinity and Beyond: The Still Untapped Value of IT

There are two mind-sets when it comes to budgeting for information technology: It’s either a line item cost or a driver of value. In the former, IT provides services such as servers, storage, processing, email, telephones, and networks. In the latter, technology propels the business forward to achieve strategic goals.

In the former, costs are relatively easy to assess. In the latter investments are often difficult to quantify, if not justify. The true value of IT infrastructure depends crucially on the organizational culture and its use in an enterprise context. Does IT primarily keep the lights on, email working, reports flowing and scrutinized? Or does it drive value by compelling shifts that optimize processes and drive new business models?

Unknown Unknowns

Much research has established that flexible IT architecture and management is a potent source of competitive advantage. Yet evaluating the multidimensional, unpredictable dynamism of IT value is a continuous challenge.

Today, people tend to think of driving IT value through ecommerce, connections to customers through social networks, and marketing. But the resultant data often isn’t effectively leveraged. Data technologies have evolved rapidly, but they are often adapted piecemeal. Result: Enterprise data is vastly underutilized. For example, McKinsey & Company discovered one oil producer used a scant 1 percent of the data generated by some 30,000 sensors on an offshore oil rig.

To drive value, businesses need to rethink their digital strategies, viewing data as a supply chain and enabling it to flow easily and usefully throughout the organization. Coca Cola Amatil, among the largest bottlers of soft drinks in Asia, boosted sales by 12 percent by retrofitting vending machines with touchscreens and facial recognition technology to create personalized experiences. Sensor data analyzed by jet engine manufacturers sparked a business model transformation focused on selling thrust and support services rather than physical equipment.

Embedded intelligence can be far more effective and less costly than focus groups or consumer surveys in product and service development and refinement. By analyzing usage data, a car manufacturer discovered customers were not using seat heaters as frequently as weather data would dictate. So they redesigned the dash touchscreen to include seat heater controls, increasing usage. Embedded sensors and data analysis on the factory floor can predict when equipment needs repair, dramatically reducing maintenance costs and downtime.

Value: Limitless

McKinsey & Company estimates that optimized IT architectures have the potential to generate $11.1 trillion per year in value by 2025. Yet much of this value will strike as surprise, driven by creative data gathering and application and innovative models that are as yet unknown. In truth, IT value is limited only by the expanse of the human mind.

For more on transformation and the New Style of Business, read “Is the Road Runner Rate of Change Turning the Enterprise Into Wile E. Coyote?