Business System and Business Strategy
June 18, 2009 by Raj Sheelvant
McKinsey Quarterly presents Enduring Ideas: Business Systems. This article makes a compelling presentation that by alignment of Business System is the cornerstone in creating a truly integrated business strategy.
So what is a Business System? According to the article “the business system” charts all the steps involved in creating and delivering a company’s product. At each link in the chain, from product development to sales and service, managers have a choice of how to conduct the business. From a strategic point of view, the most important assessment is how the choices made at each step reinforces the company’s overall value proposition and, hence, its competitive advantage. The word system in business system emphasizes the importance of aligning conduct at every step with the value proposition.
The article categorically states that the business strategy involves an integrated set of actions designed to help companies gain sustainable advantage over competitors. The business system is a framework that allows a company to formulate the set of actions most likely to achieve this advantage. In 1985, Harvard’s Michael Porter introduced a similar framework—the value chain—and cited the business system concept in the book Competitive Advantage.
See the interactive presentation here.
From an IT Strategy standpoint, once the business system is mapped and set of actions that achieve competitive advantage is determined, then the CIO needs to see if those steps can be automated so as to improve efficiency. IT department needs to understand the business system so that they can apply their expertise in software automation to widen the competitive advantage. That way, IT or internal software development organization can play a key role in enabling the Business Strategy. Obviously some steps cannot be automated because the ROI of automation is small and human glue can work better with training.
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Comments (1)
I love this article. I can’t tell you how many companies I’ve seen with disjoined system and thus disjoined overall strategy