Nearly every organisation pursues strategies to differentiate it from its competitors. According to Haydn Pinnell, MD of Gallium, the essence of business strategy is being different.
“A firm might do different things from its competitors, such as offering different products or addressing different markets. Alternatively, it might do the same things in different ways, such as providing a lower-cost service. In either case, what marks an action as strategic is its ability to differentiate an organisation from its competitors, letting it provide unique value to customers.”
Competitive advantage flows from successful differentiation. Yet Pinnell points out that keeping good ideas secret is hard, and so remaining different is challenging.
“The first firm in an industry to implement a successful innovation gains a significant competitive advantage. The second firm to implement this strategy also derives some advantage from it. By the time the third firm in an industry follows suit, the new approach is usually well on its way to becoming a best practice,” he says. “Anybody who doesn’t implement it is likely to be at a competitive disadvantage. What begins as an innovation becomes an obligation.”
There’s no shortage of examples that illustrate this. The first airline to add self-service check-in kiosks, for instance, gained a significant competitive advantage. The second airline to add self-service check-in kiosks also got some advantage. Yet today, kiosks are a cost of doing business for every airline -not having them would be a competitive disadvantage.
“Pretty much every modern business strategy depends in some way on IT. In most firms, custom applications play an essential role in providing this differentiation – and these are further constrained according to the industry in which the company operates,” Pinnell says. “Eventually, however, everything becomes a utilitarian IT function that must be supported effectively.”
While packaged software is important to many businesses, getting strategic differentiation from a generic package is hard. Because of this, innovations depend on custom applications. Both the creation and operation of custom applications are accomplished through the process of application lifecycle management (ALM).
Like a human life, an application’s lifecycle is demarcated by significant events. It begins with an idea. Once the application is created, the next big event is deployment, when the application goes into production. And finally, when it no longer has business value, the application reaches end of life and is removed from service.
“ALM is much more than just writing code. All of its aspects aspects—governance, development, and operations—are important,” says Pinnell. “Think about a project that gets the initial governance aspects wrong, for example, perhaps by not understanding the business needs or failing to get the right stakeholders involved. No matter how well the organisation does development and operations, this project won’t provide much business value. Similarly, a project that targets the right problems using a first-class development process might ignore operational issues, such as providing enough resources to run the application reliably. Once again, the business value this investment provides won’t be as large as it should be.”
Taking a broad view of ALM can help organisations avoid problems like these. Maximising the value of the applications means doing all three aspects of ALM well. Taking a broad, holistic view of ALM is essential for improving this critical business process.
“You have to take a business-centric approach to application lifecycle management,” says Pinnell. “You have to ask: does the application provide the functionality needed to meet business requirements? Does the application function with sufficient performance to meet business requirements? Does the application deliver adequate security to meet business requirements?”
The ability to support new business strategies is at the heart of business/IT alignment. Missing a chance to differentiate the business because an IT organisation can’t quickly support the CEO’s big new idea has far-reaching implications. Similarly, when a competitor rolls out a new strategy that lets it be first to exploit a window of differentiation, it’s important to follow suit as fast as possible. “Doing this commonly requires creating new applications, which depends on effective ALM,” adds Pinnell. “Viewing ALM as a foundation for business strategy isn’t a stretch; it’s just a statement of fact.”