Where companies standBy Lawrence Walsh | Posted 2008-09-29 Print
The results of the Baseline/BTM 500 study show that enterprises that fully integrate business and technology management are more agile, more competitive and potentially more profitable.
Of the Fortune 500 companies Baseline and BTM evaluated:
29 percent are synchronized and approaching full convergence (Level 4 and above—Quartile 1)
29 percent are fully in alignment, approaching synchronization (Level 3.5 to 4—Quartile 2)
24 percent are increasing alignment (Level 3 to 3.5—Quartile 3)
17 percent are in pre-alignment (less than Level 3—Quartile 4).
As mentioned previously, less than 1 percent of the companies have achieved full convergence (Level 5).
Conventional wisdom presumes that technology will lead to greater operational efficiency, lower costs and higher returns on investment. It doesn’t understand how consistently—and to what extent—converging business and technology delivers rewards. The Baseline/BTM 500 study found that companies in the top quartile experienced more than a 5 percent higher rate of revenue growth than nonconverged industry peers (20.5 percent compared to 15.3 percent) and an ROI rate that’s nearly a full point higher (7.5 percent compared to 6.8 percent) between 2003 and 2007.
Baseline and BTM assessed the survey sample in six financial measures relative to business-technology convergence: five-year averages for return on assets, equity, investments, EBITD, annual growth in revenues and annual growth in earnings per share (EPS). Nearly 60 percent of the companies in the first quartile exhibited superior or average performance. In the third quartile, only 50 percent of the companies had similar performance, while only one-quarter to one-third of the companies in the lower two quartiles had superior or average performance.
The past five years have proved the value of resilience: the ability of an enterprise to leverage technology for agility in order to respond to changing market conditions and capitalize on new revenue opportunities. Leaders outperform their own industry groups in four of the six financial measures tracked (return on equity, ROI, revenue growth and EPS growth), and they are in line with their own industry groups in the remaining two (return on assets and EBITD).
Perhaps the strongest evidence in the value of convergence is the return on stock value to investors. Companies in the top quartile of the Baseline/BTM 500 had an average stock value return of 236 percent, compared to an average of 111 percent for companies in the lower three quartiles.
The Baseline/BTM 500 falls in line with the findings of the BTM Institute, which established that converged enterprises—those achieving Level 5 maturity—are good enough to know when to change the rules to maintain strategic advantages over their competitors. While less mature enterprises enjoy increasing benefits as their maturity increases, none of them equal the performance of converged enterprises.
At Level 1 (the least mature), enterprises typically execute some strategic capabilities in a disaggregated, task-like manner. A Level 2 organization exhibits limited capabilities, attempts to assemble information for major decisions and consults the technology function on decisions with obvious business-technology implications. Enterprises at Level 3 are “functional” with respect to the capabilities, and those at Level 4 have the capabilities fully implemented.
Our study shows that enterprises at lower levels of maturity will score lower for business-technology productivity, responsiveness and project success than enterprises at higher levels. As maturity extends above Level 3, the resulting synchronicity of business strategy and technology delivery makes the enterprise more agile and adaptable. For such companies, changes in the business landscape compel appropriate adjustments to strategy and corresponding action without major disruptions. They sense and address emerging opportunities more quickly.
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