Business and IT Strategies
The paper will examine the relationships between business strategy and IT strategy. The guideline is to find problems with strategy formulation and implementation. The paper based on two articles “Nobody to Play With” and “Putting the Horse First”. The first article “Nobody to play with” present the failure of integrated information system. Jack Lowry had a dream to manufacture company with integrated information system aimed at reducing costs. The company will allow other companies to collaborate on production and design of future products.
The dream was to link ERP and product data management with other systems with the purpose to generate critical manufacturing data and to provide immediate access to product changes rates. The idea seems prefect, although strategic planning of the project failed to succeed for many reasons. Firstly it is necessary to admit that Lowry spent two years to provide the detailed technical groundwork for his computing environment. In the result the desired outcome – Goldman was ready for collaboration. But Lowry didn’t foresee its suppliers and partners. His first strategic problem was that his partners and suppliers were not ready for collaboration because of failure. (Nobody to Play With)
The next strategic mistake is too many ungrounded hopes, because Goldman didn’t make significant investments for the last 25 years. Lowry must have predicted that facts, but he missed it. Goldman placed Lowry in the position of IT head. The opportunity for Lowry was the absence of legacy systems in the company and he was able to link internal systems with potential customers and suppliers supply chain. But again Lowry’s strategic thinking failed. Lowry was surprised that sales people were not interested in IT technologies.
The first reason was that widespread adoption of collaboration technology was several years ago. The next argument provided by companies is that they firstly preferred to link design systems and only then integrated ones. The common excuses were unreliability of technical issues, absence of proper software and customer’s fear that integrated systems will result in significant layoffs. Lowry failed to persuade customers about the benefits of the system and many were afraid they wouldn’t justify the expenses spent on installing the system. (Nobody to Play With)
The second article “Putting the Horse First” talks about the failure of B2B exchange. Several years ago business-to business exchanges were very popular among companies and experts thought the success of B3B exchanges is inevitable. The idea of the system was to act as hub – to connect sellers and buyers in electronic market. But the strategic managers failed to foresee that the boom will quickly go away, because the potential investors will ask questions about viability of the business model. Nowadays B2B is almost dead.
It is possible to say that idea wasn’t wrong; the problem was incorrect strategic thinking failed to introduce B2B advantages in the market. The reason of the failure is founders who “put the cart before the horse”. Their thinking seems proper: firstly to create the necessary marketplace to connect buyers and seller and, secondly, to improve liquidity, transparency and efficiency of B2B. In the result they would make money through transaction fees. But struggle for liquidity appeared to be the first serious symptom of the problem.
B2B exchanges should instead of struggling firstly solve business problem “one customer at a time”. Most interactions of B2B involved collaboration on forecasting, planning and problem solving. But the real problem was “improving the efficiency and effectiveness of the processes by which they interact with existing suppliers and partners”. The next problem is emerging of new software and companies in the electronic market.
New companies developed a solid base of customers and suppliers and thus outshined B2B. Modern strategic thinkers should realize that the future of B2B is not on the exchange, but in the software solutions aimed at bringing additional efficiencies to specific companies. The best place for B2B should be trading exchanges with anonymous sellers and buyers, because only pure commodities can be sold in the electronic market. (Putting the Horse First
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“Nobody to Play With – Collaborative Computing”. Available at http://www.cio.com/archive/101501/nobody.html
“Putting the Horse First – Net Gains”. Available at http://www.cio.com/archive/051502/netgains.html