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Skip to 0 minutes and 5 secondsLet us revisit the idea of business value. An organisation should only ever make an investment in an asset if there are business-value returns to be gained. So what exactly is meant by 'assets'? And what types of business-value returns are we talking about, here? It turns out that a neat little theory called 'IT Portfolio Theory' explains what these different types of asset classes are and what business-value returns we could expect from each asset class. Going back to our restaurant example, the first category of benefits we discussed was to do with automation-- automation of transactions. That is, taking orders from customers, chefs being notified of orders coming in, and so on.

Skip to 0 minutes and 53 secondsIn IT portfolio theory, this falls into an asset class called the 'transactional assets'. Then what are the business-value returns? It primarily comes down to cutting transaction costs, increasing transaction efficiency and throughput. In the restaurant example, the second category of benefits we discussed fell under the umbrella of what we called "informate." That is, using the information captured by the transactional system to make better decisions. There's an element of analytics involved here. For example, we could look at upselling by individual waitstaff, to find out who are our best employees, then increase the number of shifts allocated to them. We could find out which days and times the restaurant is busiest and tailor our staffing accordingly.

Skip to 1 minute and 44 secondsHow about determining our best dishes and recognising any seasonal variations, so we could plan our menu offering. Any investment in gathering information, storing this information in data warehouses and big-data systems, decision support system, all these fall into informational asset class. What are the business-value returns here? Better information primarily, leading to better control and improved quality. One asset class that we really haven't tapped into last week is infrastructural assets. Our transactional systems, transaction assets, and information-analyzing systems and capabilities-- that is, informational assets-- both rely on a basic level of IT infrastructure. Transactional and informational assets are built on top of this foundation created by the infrastructural asset class.

Skip to 2 minutes and 39 secondsIn our automated restaurant ordering system, we had a wireless router that enabled orders to be transmitted wirelessly from waiters' handheld devices directly to the kitchen. Handheld terminals themselves could be classified as infrastructure and so, too, the printers and monitors that display orders around the restaurant. What are the business-value returns from this asset class, you may ask. Standardisation, so that different systems can talk to each other and speak the same language, so to speak, reducing IT costs, business integration, and business flexibility. The other remaining asset class that we haven't touched on is the strategic asset class. Strategic assets aim to give your business a firm competitive advantage, enabling consolidation of the position in the marketplace or gain market share.

Skip to 3 minutes and 29 secondsIn our restaurant example, if you could take orders from customers, say, within 30 seconds of them being ready to order, that's better customer service our competitors may not be able to match. Because waiters are not preoccupied with remembering which food goes together with which wines, they might be more relaxed and able to serve customers with smiles on their faces. Again, that's better customer service. If our waiters are happy, then we'd have less employee turnover. That's better employee satisfaction. All of those add up to elevating the restaurant's reputation and elevating market position. In terms of business-value returns from the strategic asset class, we have product and process innovation, competitive advantage, better market position, just to name a few.

Skip to 4 minutes and 19 secondsOther important distinctions in the strategic asset class is that it's not exclusive and always overlap with other asset classes. Let us imagine our restaurant competitors also invest in an automated order-taking system. All of a sudden, we don't have the strategic advantage we once had. Then it stops being a strategic asset. But that's not to say the transactional benefits are still not there. So, strategic assets, as their strategic value fades away in time, falls back into either infrastructural, transactional, or informational asset classes.

Revisiting business value

The IT portfolio draws on the four different types of assets and identifies the relationship of these to specific business returns.

If you consider the Pic Nic Pak cafe example, the cafe experienced multiple business value returns within the different types in the IT portfolio. For example, returns included:

  • cutting transaction costs, increasing transaction efficiency and throughput
  • better control and improved quality.
  • reduction in IT costs leading to business integration and business flexibility
  • product and process innovation, competitive advantage and better market position.

Your task

Discuss the transactional, informational, infrastructural and strategic assets in relation to a business you are familiar with in the comment section.

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Competitive Advantage: Using Information to Gain a Competitive Edge

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