Why Business Technology Capability

As discussed in the previous post, Competitive Advantage can be found at the Productivity Frontier. On the other hand, technology is by far the biggest productivity booster. By adding 1+1 it is easy to predict the winners of this race: They are the ones most able to utilize technology for productivity gains. The ones that can operate at the productivity frontier – sometimes even pushing it by themselves for competitive edge over less capable industry players.

However, to utilize technology for higher customer value, better customer experience and improved operational efficiency calls for extensive capabilities. The company needs to build and develop its Business Technology Capability.

Traditionally, Business IT has been about operational efficiency. IT’s role used to be very clear: To make business processes more efficient by reducing manual work, processing information and improving communications. With digital disruption, IT’s role has now expanded dramatically. No longer it deals with operational efficiency only. Rather, today IT is everywhere in value creation. In addition to business processes, it can now be found in products and services for higher customer value and in digital solutions for better customer experience. Furthermore, IT has become key enabler across the technology landscape from traditional Internet to blockchain.

No longer can IT be treated as vertical Business IT amongst other technologies. Instead, IT has transformed from vertical Business IT to horizontal Business Technology.

Figure: IT has transformed from vertical Business IT to horizontal Business Technology Capability

Two important questions still remain:

  • Q1: Why Business Technology is also a capability?
  • Q2: What is the rationale for placing Business Technology into capability core?

A1: Although IT is the technological backbone, the overall BT Capability is much more. It’s about Assets from human skills to computing infrastructure. And it’s about Activities from business processes to cloud migration. Business Technology Capability is the umbrella term for the full set of assets and activities. Assets and activities share the common goal: To enable technology utilization for best possible productivity and competitiveness.

A2: Organizing all company capabilities as business technology assets and activities simplifies the management and transformation challenge. It acknowledges technology’s leading role as THE productivity booster. However, “organizing” should not be taken literally but rather as a lens for perception and communication. For example, the traditional ways to structure human resources and to agree on reporting lines, to design governance for high-quality decision making or to run business processes all remain. In this way, business technology capability is more about framework for planning and management rather than reorganizing everything.