Investing According to Analysis

Creating new core is the domain of pilot projects and skunk works. Typically, the company is still incubating the new capability, not exposing it yet to the marketplace at large, and not expecting significant revenue from it in the short term. That’s why it is not yet mission-critical. But it is incredibly strategic, particularly if you can shorten a new product or service’s time to market. Here’s where IT may be able to make a big difference, whether it is via converged communications and computing systems that speed collaboration, beta customer feedback systems that shorten cycle time, or supply chain management that supports rapid prototyping. But if IT resources are allocated by revenue contribution, then this quadrant will always get short shrift, and the company will lose precious time to market in an act of false economy. (That’s why it’s so important to allocate resources based on a core/context analysis.)

By contrast, putting IT in service to mission-critical context makes all kinds of sense to everyone involved. If competitive differentiation is not a key goal, then standardization is a great alternative, and nothing imposes standardization better than IT systems. Moreover, once processes have been standardized, they can be reengineered to extract resources either through automation or eventual outsourcing, thereby freeing up those resources to be invested in core activities.

The key here is to recognize that if a process is mission-critical but not core, then there is nothing to gain from differentiating its outputs. Therefore, user requests for nonstandard output need not—indeed, should not—be prioritized because they are not strategic. For example, users often argue that since the systems are being charged back to their budget, they should be entitled to get what they want for their money. Not so. It is not their money; it is the company’s money, and they have a fiduciary responsibility to get a good return on it. There is more strategic value in standardizing mission-critical context processes because it frees resources to invest in strategic differentiation elsewhere.

Finally, that leaves processes that are neither core nor mission-critical—facilities management, training seminars, office supplies procurement and the like. These cry out for outsourcing. Here, IT can make the biggest contribution by preparing the processes for service-level management. That is, prior to transferring the work to another party, IT can first determine what the standards of acceptable work product are, establish metrics that track to those standards and even pilot those metrics while the work is still in-house. Then when the work is outsourced, the company has a low-touch, high-reliability mechanism for ensuring vendor performance.