M is for growth Jyoti Banerjee, M INSTITUTE

Question: Does IT matter?

o Robert Solow: no evidence that IT made any difference to US productivity across the 80s and 90s

o Nicholas Carr: IT is an essential infrastructural element, like electricity or air-conditioning, but without any competitive advantage

IT really does matter

o Keystone: IT matters in mid-size firms because it enableso Profitable business growth o Scale – increases in the complexity of

business processes, organisation and business model.

Mid size enterprises power the UK economy

o Only 6% of UK companies are in the £10m - £250m turnover bracketo Yet they employ 30% of the British

workforceo And generate 20% of corporate profitso And grow at over 8% per annum

o Despite their performance, they are nearly invisible o They are usually lumped together with small

and micro enterprises which are very different from them in character and operation.

Understanding M companies

o M-focused research from the Institute of Chartered Accountants:o Taking the M out of SME – a research study

from the ICA and BDO Stoy Hayward

Seven differences – different ballpark?

Small business Medium business

Owner-managed Professional management

Micro-management of employees

Culture enables employee development

Informal processes Formal processes and structures

Short-term horizon Longer-term planning horizon

Low external input External input from professionals

Equity held by founder / family

Wider equity base

Small customer base Diversified customer base

Source: 2005 research by the Institute of Chartered Accountants and BDO Stoy Hayward

How IT is analysed makes a big difference

o The amount of money spent on IT is a poor indicator

o Keystone analysed what IT does in all major areas of a business:o Sales and marketingo Financeo Operationso Product developmento Supply chain managemento Human Resource Managemento Infrastructure

Scenario-based IT Scorecard

1. Sales Pipeline Mgmt.2. Proposal Development and

Management3. Relationship Management

Database4. “Big company” web

presence5. Customer self service6. Marketing & Campaign

Management7. Complete insight about my

customers

1. Easy period close 2. Effectively pay suppliers/

partners on time3. Automated and timely

collections4. Automated Payroll5. Online, integrated banking6. Taxes across products and

regions7. Automated corporate

governance8. Effective forecasting9. Complete insight about my

finances

1. Project Planning and Mgmt.2. Contract & Change Order

Mgmt.3. Time and Expense Reporting4. Resource Management5. Procurement and

Subcontractor Management6. Document Management and

Delivery7. Benefits & Administration

Mgmt.8. Performance & Incentives

Mgmt.

1. Easy to find information2. Easy to use information

1. A network ties all computers and devices together2. Easy access to the Internet3. Pervasive Security4. Mobile and remote access to information and processes

3. Easy to Communicate4. Easy to Coordinate Teamwork

5. Manage and Protect Data6. Manage and Configure Devices7. Update SW on all desktops

Sales/Marketing Finance & Administration Operations

Empowered Professionals

IT Infrastructure

Sample IT Scorecard for PrintForLess.com

Sales & Marketing

Overall Score

Finance

Operations

Empowered ProfessionalsIT Infrastructure

1999 200520% 73%

25% 75%

10% 60%

40% 67%

20% 83%

43% 86%

Proposition: larger firms can make better use of IT

2003 Revenue, $$Millions

Bottom 25%

2nd 25%

3rd 25%

Top 25% 21.36

23.59

23.52

19.43

Quartiles based on IT CapabilityOperating Margin

10.58

10.21

12.42

7.29

Employee Count

228

250

257

197

Proposit

ion not supporte

d by

the data

Proposition: spending more on IT gives you more capability

Bottom 25%

2nd 25%

3rd 25%

Top 25%

Quartiles based on IT Capability

IT Spend % Revenue

7.50

11.65

6.36

3.21

IT Dollars (K) Spent per Employee

7.02

10.97

5.82

3.17

# PC’s per Employee

0.990

1.122

0.979

0.997

Better IT Capability costs marginally more. Other factors increase the cost of IT significantly without providing better capabilities.

In all cases, roughly one PC to one employee

Proposit

ion not supporte

d by

the data

Multi-step / process-led IT works

Implementing the process changes in software and systems.

Identifying the specific process changes needed to drive each key business lever.

Business Strategy

A data-driven vision of how to use the key economic and competitive levers in your business to drive success.

?Business ProcessTechnology

Implementation

Multi-step / process-led IT works

o Formalised processes: easier to handle complexityo Streamlined operations: growth without headcount

increaseso Flexibility: take advantage of new opportunitieso Better decisions: visibility of critical business issues

Implementing the process changes in software and systems.

Identifying the specific process changes needed to drive each key business lever.

Business Strategy

A data-driven vision of how to use the key economic and competitive levers in your business to drive success.

Profitable Sales Growth

Ability to scale up the business at minimal incremental cost.

Business ProcessTechnology

Implementation

Applying the model to PrintForLess.com

Implementing the process changes in software and systems.

Identifying the specific process changes needed to drive each key business lever.

Business Strategy

A data-driven vision of how to use the key economic and competitive levers in your business to drive success.

Profitable Sales Growth

Ability to scale up the business at minimal incremental cost.

Business ProcessTechnology

Implementation

Implemented new order processing system and developed partner portal.

Expand effective capacity via partners:

• New work sorted for profit potential

• Lower profit work dispersed to partners.

Vision: Increasing capacity utilization through leveraging partners.

Business achieves utilization of 120% of capacity; dramatic increase in profitability.

PrintForLess.Com Example

Bottom Line

On a 100 point IT capability scale, 10 points of improved IT capability delivers 1.9% of compounded annual revenue growth

o Result applies to product and service companies

o Model works in US / Latin America / Europe surveys

M-scaled challenges

Challenge Process issueExec Talent Finding the right people to fit the right

processes

Growth strategy Identifying the levers for competitive differentiation and growth

Finance Financial strategies needed to deliver business goals

Technology Technology infrastructure and applications to formalise processes in organisation

External input Getting help from the right people to deal with these challenges

Regulatory impact Don’t forget that the government remains a key player in your business

Find out more

M is for growth Jyoti Banerjee, M INSTITUTE