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How to transform IT investment from cost center to competitive advantage

Some C-suite leaders are under a misconception: that the role of IT is to maintain systems & networks, prevent downtime and address operational bottlenecks. 

But this significantly undervalues the potential for technology to deliver strategic outcomes across an entire business. The real opportunity for IT is the capacity to reimagine and improve fundamental business processes and decision-making. By strategically aligning IT investment with core organizational goals, companies can unlock untapped potential for innovation and competitive advantage.

Let's take a look at some of the areas where IT investment can yield the most significant returns:

  • Supply chain management - forecasting with precision: A McKinsey study found that companies applying AI to supply chain management - even in data-light environments - can reduce forecasting errors by 20-50%, leading to reduced inventory costs and stockouts. The same study also found that many business leaders wrongly assume current processes are too manual to provide accurate or timely data for AI-driven demand forecasting.

    And for the most innovative enterprises AI and ML are moving beyond forecasting into predictive risk management. By incorporating real-time data on geopolitical events, weather patterns, and potential supply disruptions, organizations can proactively identify vulnerabilities and build more adaptable supply chains. This allows for strategic pricing, proactive risk management, and optimized resource allocation.
     

  • Marketing - the personalization Imperative: In an ecommerce environment saturated with choice, businesses that can deliver tailored experiences always emerge as the clear winners. According to Salesforce in 2023, 65% of customers now expect offers to be personalized to them and will stay loyal to businesses which do this - up from 52% in 2020 and 49% in 2019.
     

IT plays a pivotal role in enabling ecommerce persoanlization, collecting and analyzing customer behavior data, facilitating targeted marketing, customized recommendations, and seamless customer journeys. This level of tailored interaction leads to increased engagement, loyalty, and ultimately, higher revenue.
 

  • Product Design & Manufacturing - generative design:  Underpinned by AI algorithms, generative design software (like Autodesk) allows engineers to keep up with demand, reduce error and waste, and accelerate efficiency by defining parameters and constraints for a design. The software then automatically generates and iterates on a series of potential designs that meet engineers’ criteria. The outcomes are much faster product development and optimal use of resources, beyond what would be possible through a purely human-driven process. 

 

  • Human resources - skills-based talent management: As job markets become more competitive across the world - with more candidates often looking for fewer jobs - AI-powered platforms will shift HR's focus from traditional job descriptions to a skills-based model.

    These platforms will analyze large numbers of resumes, internal performance records, and external skill trends to identify talent gaps, suggest upskilling opportunities, and build dynamic teams optimized for specific projects or market needs. The outcome for business, ultimately, is fewer resources required for HR and access to the optimum talent for individual business needs. 

 

6 priorities for IT-focussed organizational adaptation 

Maximizing returns on IT spend goes beyond making financial commitments. It means making a broader shift in organizational perspective and operating models:

  1. Demolish silos: Collaboration between IT, other business units and external stakeholders is crucial to align technology solutions with specific business and market needs. Open dialogue from the boardroom downwards promotes a shared understanding of strategic priorities and paves the way for the identification of potentially transformative applications.
     
  2. Capitalize on IT's business acumen: CIOs and CTOs must communicate fluently in the language of the business. There’s a key opportunity for IT leaders to share their deep understanding of key performance indicators, competitive dynamics, and the strategic priorities of the organization to cement IT’s role as an integral part of the decision-making process and drive change from within.

 

  1. Create a data-driven culture: IT should be the champion for better use of data and analytics across the entire business. That means providing access to relevant data for all business units, building user-friendly dashboards and visualization tools, and offering training programs to empower employees at all levels to make informed decisions based on insights rather than guesswork.
     
  2. Focus on strategic goals: Clearly articulate the primary objectives of the organization; this lays the foundation for targeted IT investments that are genuinely transformative. Spend time on scenario planning to consider a wide range of potential futures - from technological disruption to changing market and customer needs.
     
  3. Embrace experimentation:  An 'experiment and iterate' culture within IT teams encourages exploration. With a 'fail-fast' mindset, teams are much more likely to discover novel business applications for new technology and create breakthrough solutions that move the needle. 

 

The CIO's mandate: lead the digital transformation

For technology leaders, the ability to leverage IT spending for strategic business advantage is no longer a luxury; it's essential for survival. Those enterprises able to reevaluate technology expenditure as a catalyst for growth, rather than a cost-center for infrastructure, will dominate the most competitive markets. SBM can help. Talk to us to learn more.