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Study Provides Evidence That Technology Execution Leads to Business Performance

BTM Institute says "converged business technology management" leads to improved business performance.

July 25, 2007 — CIO —

The fundamental problem when businesspeople use trendy phrases like agility, innovation, resilience and adaptability is that their meaning is not clear. Now the BTM Institute, a nonprofit think tank established to study how best to manage business and technology, has come up with a definition: consistent execution, with constant growth that’s tied to financial performance.

That’s the point made by a new study from BTM Institute, says Faisal Hoque, founder and chair of the BTM Institute.

3 Takeaways on Business-Technology Convergence

Faisal Hoque, founder and chair of the BTM Institute, cites three key lessons from his group's study of business-IT convergence:

1. Top corporate executives should realize the financial impact that a unified business technology organization can have. “That is the most important thing,” Hoque says.

2. Being a converged business technology company does require a different level of management thinking. “You cannot just say, ‘Let’s manage IT as a business,’” he says. “You cannot separate IT from the business. [Business technology] has to be institutionalized.”

3. You have to be able to measure how these business technology management capabilities are guiding organizational maturity and how that connects back to the financial results.

The BTM Institute examined five years’ worth of Global 2000 financial data and analyzed the companies’ capabilities in four functional areas: governance and organization; strategy and planning; strategic investment management; and strategic enterprise architecture. Cross-referencing these sets of data and capabilities shows that companies with what the BTM Institute calls “converged business technology management” have markedly increased financial performance and exhibit superior revenue growth and net margins than others in their respective industries.

In short, the data demonstrates that these companies are agile, innovative and resilient. (The full research report can be downloaded here.)

“This is not about a project or ROI, but it’s about overall performance of the company,” Hoque says. For example, those companies with converged business technology management had 12 percent average annual revenue growth, compared with 4 percent for their industry groups. They also achieved 36 percent average annual earnings per share growth versus 7 percent for the industry groups.

In addition, the converged business technology companies also grew at a faster pace and had greater returns than did their peers, says the report. The supporting data found that they had 6 percent higher EBITD (earnings before interest, taxes and depreciation) margins, 4 percent average higher return on equity, 8 percent average higher return on assets and 14 percent higher return on investments.

So just which companies are these with “converged business technology management”? A partial list includes FedEx, Harrah’s Entertainment, Lockheed Martin, UPS and Wal-Mart. (To read how UPS CIO David Barnes, who is featured in the report, got to where he is, see Nothing Succeeds Like Succession Planning.) “By developing these management capabilities, an organization creates an environment for strategic exploration and business agility,” says the report. “It has a clear understanding of technology’s ability to accelerate both the development of strategic positioning and innovative business models.”