Seeking to sharpen their competitive edge, many asset management companies are refining their business models. They’re placing greater emphasis on investor-facing functions such as marketing and distribution, while developing products for new investor needs. Yet, all too often, IT struggles to support these initiatives – holding back changes that are critical for future business success.
Investor preferences are shifting and pricing pressure rising. But IT is often an impediment to progress – slow, inflexible, expensive and not offering what the business wants.
So what can technology leaders do to improve performance? In essence, you need to concentrate on working more closely with the business, making sure you’re involved with strategy planning and removing any obstacles to progress such as bureaucratic governance. To help IT executives make this transformation, we’ve defined nine new rules of IT strategy, many of which contrast with conventional wisdom.
As a first step, we recommend a review of IT strategy. Such a review should define the business vision, guide alignment with the business and create a plan that reflects best practice. In this way, you can understand business trends, identify potential solutions and evaluate difficult trade-offs. When conducting this review, you should consider our nine new rules.
The rules in brief
- Strategy must become routine
IT strategy reviews tend to be periodic, isolated events that do little to change how the function operates. Instead, IT strategy should evolve continually, to align with the company’s mission, corporate strategy, operational plans and planned organisational capabilities – and to take advantage of advances in state-of-the-art technology.
- The IT and business interaction model matters... a lot
Structures established to align IT with the business are often rigid and unsuited to the asset management industry’s dynamic nature. But as products and distribution channels change to sharpen competitive advantage, business leaders must promote a new way of thinking that develops IT capabilities at the same pace as the business.
- IT needs to focus on the same challenges as the firm
Corporate strategy has often treated IT as an afterthought. While CIOs are gradually earning a seat at the boardroom table, this isn’t enough. CIOs and other business leaders need to engage fully with the business in order to have truly equal standing with other executives.
- Governance can be too much of a good thing
IT governance paralysis afflicts many IT companies. Over the past three decades, IT governance has often evolved to the point where it limits autonomy and flexibility, denying access to many technologies. Governance should be pragmatic, offering an optimal mix of decision-making rights and delivery responsibilities.
- A strategy is important; a game plan is critical
Unexecuted strategies are a form of self-delusion. Just as with other areas of a business, the IT function needs a game plan that outlines a tactical path for implementing the strategy. While strategies stay the same, game plans might change to reflect events. You need both to deliver value.
- It’s all about the business
You can spend too much time and money defining a system’s architecture that produces results that appear technically perfect but don’t fulfil your organisation’s needs. You should avoid becoming too attached to the technical details of implementation to the detriment of flexibility and results.
- Be careful about imitating your way to success
There’s often a strong temptation to benchmark in technology, especially because IT functions don’t report financial metrics. But asset managers often benchmark themselves against companies that aren’t strategic peers. Benchmarks might inform, but the true measure of your performance is how well IT helps to execute corporate strategy.
- Choose the right yardstick
Some organisations have monthly metrics dashboard reports that run to 100 pages or more, and end up obscuring strategic progress. Identifying a small group of measures with implications for the individual business units will increase transparency and understanding.
- Eyes on the prize
IT executives tend to view success in terms of operational key performance indicators – such as avoiding system crashes, preventing security lapses etc. Instead you should seek to deliver real value to the business through, for example, enabling new products to be created faster or giving senior management the means to identify problems faster.
Playing by IT strategy’s new rules
As you re-evaluate your approach to IT strategy, you need to understand that IT and asset management’s business leaders often have different priorities. That’s where the nine new rules of IT strategy come into play. While most of IT strategy’s accepted rules are extremely prescriptive, we’ve designed our rules to deliver value in a practical way.
We believe that our new rules of IT strategy will help asset managers to gain competitive edge at a time of change.