Alec Korogodsky-Practitioner Article-What Is Your Digital Business Strategy?

                In this particular article the authors are arguing that managers have a responsibility to maintain an IT infrastructure not only for the possible returns from using technology but how technology can give their firms a competitive advantage. The authors begin by describing how Netflix evolved their strategy from providing DVD’s through the mail to streaming movies and shows through the Internet, and eventually linking streaming Internet straight to television. Thanks to maintaining a long term evolving business strategy Netflix is primed to dominate the movie and television show rental market for years to come. Next the authors argue that IT should be created as a strategic asset that is directly in line with the firms overall strategy. They believe that firms struggle with IT strategy because firms have trouble communicating their strategy and hiring managers to make decisions regarding IT at every level. The authors propose a theory to over come this called ITracy.

                ITracy involves what the authors call the three pillars: synchronizing IT and business strategies, effectively governing IT, and managing IT with discipline. In regards to synchronizing IT, Michael Porter’s three principles to gaining a competitive advantage through IT are referred. The first principle is changing the industry structure by using IT to tilt the balance of power in the favor of the firm. The second is by using IT to outperform rivals by either cost differentiating or serving a highly niche segment effectively. The third way is to create new businesses using IT.

                To govern IT effectively, the authors argue that governance involves five principles. Managers must decide what IT decisions are crucial and who should be making them. The second principle is how the function of IT should be organized. Next managers must determine what to spend on IT projects and how to distribute between projects by prioritizing which IT projects are most essential to achieving the firm’s overall strategy. The fifth principle is managers must decide what to outsource and what to keep within the firm. Managing IT with discipline involves managers having a vision about what the future of IT potentially holds for their firm and how they can be one step ahead of the competition to ensure they get a competitive advantage.

                Reading this article Best Buy kept coming to mind. Its plain to see that retail stores are slowly being crushed by the online marketplace. Companies like Borders and Blockbuster have been annihilated by their online competitors. However Best Buy continues to open stores and bring in a steady revenue stream. But why is that when you can just order your electronics online instead of going to the store? Because Best Buy saw the growing popularity of online shopping and instead structured a fantastic IT strategy and dominate the online electronics market. Their website is very easy to use and provides either home delivery or in store pick up allowing convenience to the consumer. If Blockbuster developed a similar IT infrastructure years ago they would most certainly be thriving today.

Source:

Mithas, S., & Lucas, Jr., H. C. (2010). What is Your Digital Business Strategy? IT Professional, 12(6), 4-6. Retrieved from http://libproxy.uhcl.edu:2086/xpls/abs_all.jsp?arnumber=5662565&tag=1