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Getting The Right IT

Executives are demanding that IT contribute directly to strategic differentiation and growth. This requires having the right IT, and using business models can help get you there
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Executive expectations for IT have evolved from delivering technology services to contributing to strategic differentiation and growth of the business. CEOs are increasingly asking their CIOs: Do I have the right IT? And how do I know? To answer these questions, CIOs must connect their IT capabilities with the unique perspectives of their business models for delivering value.

The first step is to define your enterprise's business models in terms of asset types and rights, using a framework based on research by MIT's Center for Information Systems Research and research funded by the National Science Foundation.

Start by identifying the assets at the core of your product and service offerings. Then, determine the rights you hold to the assets. Do you create the asset for the customer (creator), rent or lease it to the customer (landlord), distribute a product or service (distributor), or match up buyers and sellers (broker)?

The next step is to define the models in greater depth by describing their uniqueness in terms of 10 perspectives as based on the approach developed by Arvetica consulting partner Alexander Osterwalder, formerly of the University of Lausanne. They are:

Value proposition; Target customer segments; Communication and distribution channels; Relationships with customers; Core capacities; Configuration of activities; Partners and their motivations; Revenue streams; Cost structure; Values and principles. The final step is to connect these perspectives with IT capabilities.

Determining The True Business Model

There are two basic elements of a business model. The first is an archetype, which essentially defines what business the enterprise is in relative to what rights to which assets the business sells. For example, a financial services company that makes loans offers temporary-use rights to financial assets (money). A complex business may include multiple archetypes.

The second element details how the enterprise does business in terms of the 10 perspectives previously listed. The perspectives must be defined for each archetype represented in the company's businesses. The way that perspectives are configured can be unique to an enterprise, creating competitive advantage (or disadvantage). Knowing the true business model is the first step in finding the right IT. The next step is to discover the IT that makes the business model work.

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