Shifting IT’s Perspective – From a Cost Center to a Business Value Creator
Director Jay Ruffin talks with Principal Yonas Yohannes and Senior Consultant Matt Williams about transitioning IT towards a value-driven approach that provides greater transparency to internal clients and focuses on improving flexibility, agility, and the quantification of the strategic business value that is being driven by technology transformation and systems rationalization.
Welcome to the Hackett Group’s Business Excelleration Podcast, where – week after week – we hear from experts on how to avoid obstacles, manage detours, and celebrate milestones on the journey to world-class performance. This episode is hosted by Jay Ruffin, a Senior Director with the Hackett Group specializing in digital transformation strategy. Jay offers guidance and context for the episode, which features guests Yonas Yohannes and Matt Williams. Yonas is an expert in all things digital, and both he and Matt serve with Jay on the Hackett Group’s transformation team. Matt has his hands in many aspects of the team’s work, but one of these areas of expertise dovetails perfectly with the topic of the conversation today: the area of price and value.
As the conversation gets underway, Jay frames the discussion with his first question: how have things like price, value, forecasting, and variance analysis changed given market conditions today? Cost transparency has been largely missing, but there has been a recent push to provide this missing information. The Hackett Group, for instance, wants to see the companies it works with explain what their value is to their business partners. In this way, Hackett wants to see a shift from cost-centered to value-centered operating. Two forces have been at play driving this sort of shift in the business sphere, namely, technological transformation and customer demand.
More specifically, the Millennials in the market bring an expectation of solutions, which in turn places pressure on companies to make sure that they have solutions available. This pressure and the technological developments that accompany it are distinct from but linked to the concept of cost transparency. This link exists because the dual forces of change inform the strategy discussions necessary to keep up with a rapidly-shifting business space – decisions fostering nimbleness and alignment with new tech. Cost transparency goes hand-in-hand with these decisions toward agility and tech advancement, since fine-tuning the company is key to having a strong value proposition to put before customers.
For companies looking to begin a transition toward greater value and transparency, the first step is for the CIO to consider both a transparency program and the need to remove complexity from the company’s existing tech landscape. Of course things like financial underpinning and a strong sense of architecture are important, but Yonas zeroes in on this need for simplification. The organization will need to consolidate applications, ultimately working to have a rationalization of its complexity to simplify the cost prerequisite to transparency. This process is crucial, because application rationalization is the pathway to nimbleness, which goes together with transparency.
The conversation shifts toward tools available for fostering price-to-value transparency, emphasizing the need for a comprehensive construct with a target architecture and an understood value of this architecture. Some industries face greater need than others to work toward this transparency, such as the financial services industry, and there is a shift toward custom tools, particularly those involving platforms, to make this transition. There are ways to gauge a company’s maturity in the area of price-to-value transparency, and the Hackett Group recommends a five-point method for assessing and bolstering maturity.
When it comes to common pitfalls, Hackett also has insight to offer companies. One major pitfall in transitioning to price-to-value transparency is merely using the transparency as a support for the company’s budgeting process. Instead of doing this, a company should understand the value businesses derive from its solutions. And once a company has transparency, it should not miss out on taking its application and tech rationalization to the next level or on getting executive-level buy-in. The conversation ends with five proposals to get companies moving toward flourishing as transparent value-creators, encouraging self-understanding, future vision, CIO empowerment, socializing, planning, and more!
- 0:47 – Welcome to this episode, featuring Jay Ruffin and his two guests
- 1:34 – How have price, value, forecasting, etc. changed given market conditions?
- 3:49 – The group talks change factors and strategy discussions.
- 8:18 – How should a company get started?
- 11:01 – Are financial underpinnings and a strong sense of architecture important?
- 14:48 – The group turns to available tools and industries facing particular pressure to change.
- 18:33 – Jay asks about gauging maturity in relation to price-to-value transparency.
- 20:33 – What are common pitfalls?
- 22:56 – The conversation ends with five proposals.