Something of Value

Something of Value

The importance of creating competitive advantage with existing data.

Every enterprise grows by meeting the needs of its customers. The information value chain links these needs to the enterprise's activities. The CIO has a clear role to play in strengthening this chain

Conventional thinking on information management technologies encourages an increase in the volume of information instead of increasing its value.

CIOs readily talk about the terabytes of data they store, but few can explain its value and how to create competitive advantage with it. They mistakenly adopt this limited view, believing information is owned by the business and therefore someone else's responsibility to extract value from it.

A pity.

Growth and competitive advantage are top priorities in most enterprises and information is tightly linked to achieving those goals. CIOs are expected to do more than run the server farm and make a contribution to strategic goals. The technical and business ability to manage those terabytes - skills that exist within an IT group - can help create competitive advantage, which is especially important when many industries offer similar products or services that use similar technology.

A CIO needs a way to identify growth strategies that better exploit business information. One approach is to use the "information value chain", which connects customer and market needs with growth in products, services and customers.

The Information Value Chain

All enterprises have an information value chain, although it works better in some organizations than in others. The best chains have three strong links from which value can be squeezed.

The first link is the accurate capture and interpretation of customer needs and market trends. A clear understanding of these two elements is vital. It means gathering the right information and developing the analytical capabilities to do something with it.

The ability to use information to develop customer and market-driven solutions is the second link. Building on the capture of customer and market trends, the organization must use this superior business performance information to experiment and create new offerings.

The final link in the information value chain is to support the use of these solutions to open new markets and attract new customers - gaining insights into what works, and what does not.

For these links to perform optimally, an organization must apply the right focus, culture, people and technology, according to Tom Davenport, professor of IT and management at US-based Babson College

The right focus. Although it's possible to focus efforts anywhere along the information value chain, leading companies work on areas determined by persistent business needs.

These needs often manifest themselves as pressure to satisfy shifting market or constituency demands, continuously reduce servicing costs and so on. Such needs can help highlight areas for focus.

Analysis must not be a passive data collection exercise. Financial services firm Capital One adopts an impressive attitude to this challenge. It encourages an experimental and learning approach to solving persistent business needs by studying market and customer information. Its information-based "test and learn" strategy is designed to identify possible solutions, try them, and learn from its successes and failures. IT's role is to ensure any initiative the business chooses to focus on must be measurable using an appropriate analytical technique - for example, statistics to identify variables or simulation for supply chain optimization.

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