Friday, February 8, 2013

Three Aspects for IT as Revenue Generator

Top-notch CIOs in various industries are creating new ways to pull in revenue at their companies.

It almost turns to be mainstream thought that IT needs to be business’s growth engine and revenue generator, but how? What strategies are CIO's using to posture IT as a revenue generating organization in organizations whose primary focus is not IT?

1. Provide Value-Added Products/Services 

Top-notch CIOs in various industries are creating new ways to pull in revenue at their companies. The techniques vary widely: Some use IT to boost showroom sales, or sell homegrown software to other companies. Others take the valuable data they produce in-house and turn it into a saleable information service

  • Mobile Initiatives: With the proliferation of mobile devices, the opportunity for creative customer-facing applications is an area ripe with opportunity for forward-thinking CIOs. By spending time with customers, IT leaders are developing innovative new mobile initiatives that increase revenue, involves customer service initiatives where the new product is an app, usually provided free or at little cost, which aims to improve customer service and loyalty that in turn generates additional revenue. 
  • The growth of cloud computing opens up similar examples, as it enables a service provider mindset, provides value-added online services that the consumer could subscribe to or explore new online sales channels. 

2. Measure IT Value in Support of New Opportunities 

One key strategy is the measure of IT value contribution in revenue generation. Through innovation, birthed within R&D, new revenue generating opportunities are identified. IT's role in those new opportunities is alignment of existing infrastructure or construction of new infrastructure in support of each opportunity

  • Measuring IT via agility lens: IT contribution to the business process is measured by the degree of agility and speed at which IT responds as a contributor to time to market and as the services provider for on-going operations and support. The period of time to bring the new opportunity from R&D conception to market introduction results in that "1st to market" position which creates consumer demand and ultimately drives market share. 
  • Measuring IT via optimization lens: IT value is measured by optimization and consumption of IT assets in support of the Business Services. To measure IT contribution to revenue generation, IT infrastructure assets both HW and SW (externally acquired or internally developed) must be linked to business services that support the revenue generation. In other words, IT value is measured by optimization and consumption of IT assets in support of the Business Services that are identified within the organization's revenue producing streams.  
  • Visibility of costs measured against visibility of quantifiable benefits: Achieving visibility of costs as a key IT strategic initiative today provides a pathway into technology optimization and justification of IT value contribution to the organization's bottom line performance within each revenue stream. Many CIOs and companies endeavor to embed IT more directly into the business, does it not become much harder to extract out the measure of tangible value (revenue) that IT might deliver? The visibility of IT asset consumption and the capability to allocate the cost of those assets based on that consumption results in an accurate measurement of IT contribution to Cost of Sale (COS) that is both traceable and visible. When people speak about an IT initiative generating new revenue, visibility of costs measured against visibility of quantifiable benefits is a way to show how IT contributes to the top and bottom line.         

3. Revenue-Generating CIO 

There is no one path to becoming a revenue-generating CIO. Some CIOs are in the game from the start with the full backing of the CEO, the board and other power brokers in the company. Others must battle from behind to prove they should be there.

(1) The primary focus is to respect the business strategies for sure. IT strategy needs to be an integral part of business strategy, and strategy encompasses business to the right destination. and IT strategies ought to be synchronizing and align with business in visions and missions. CIO must spend a certain amount of time (Though time-consuming at initial stage) to enlighten top management and to foster mutual trust, where IT is the strategic weapon to achieve business goals. As sometimes, legacy beliefs and rational thinking degrade our ability to strategize and do the rational thinking.

(2) CIOs need to perform necessary levels of communications to cross functional organizations. In order to generate revenue, in order to win initiatives, tactical investments are necessary to R&D, People development, and IT, communication is key.

(3) IT leaders are encouraging their teams to spend more time with leaders on the business side as well as directly with customers. These engagements are leading IT to be much more proactive in proposing - as opposed to responding to - ideas for new ways to improve customer service or actually create new customer value (and revenue).

(4) Fixed operational costs, processes, and risk management to be total optimized, so that redundancy will be simplified, at end, will contribute business and competitiveness to generate revenue

(5) How to deliver the expected result and measure them through the right set of KPIs with balanced scoreboard is also crucial. There will be no magical solutions for IT generating revenue, though when rationalized and optimized IT investments to be restricted, to meet a short time goal, in long run business will be on its course to generate minus revenue.

And there's almost no enterprise project these days where IT is not a big piece of the puzzle, therefore, pursuing IT revenue-generating opportunities and measure it in the right way is one of best strategies. 

1 comments:

This is a great post. It seems that many of these components are what happens after your make a cultural shift from a cost center to a profit center. What are your thoughts on changing the people in IT too?

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