Part IV: A Framework For IT Value

0

Time to market:

One of the more obvious and pronounced benefits of IT has been to make process execution faster through automation. IT has been credited with increasing efficiencies through automation. Unfortunately, often, the credit stops there. However, automation has both efficiency and effectiveness capabilities.

A company that gets products faster to market makes money faster. Money is not made till someone buys a product – the quicker we make it the quicker someone buys and pays for it. Here are some steps along the journey from concept to value recognition:

1. Generating product ideas or concepts
2. Converting concepts into prototypes
3. Getting feedback on prototypes and ensuring their marketability i.e. do customers want it and if so, what are they willing to pay for it
4. Converting prototypes into mass production
5. Distributing manufactured products to customer “outlets”
6. Taking customer orders
7. Collecting payment from the customer

The efficiency rationale is simple. If it takes the company, 100 days to get from concept to payment, then the investment it has made along the way does not produce results for those 100 days. For every day that is reduced from this cycle time, the company makes more money without doing anything additional i.e. not investing a single dollar more.

1. Time value of money:
   1. A customer payment that is with you a day earlier means you have that money to “invest” for one additional day
   2. Your investment is now paid for a day less
2. Reduced overhead: one also eliminates the cost of keeping the product for one additional day

Is there an effectiveness pay off as well? Absolutely!