American companies were nearly twice as likely as European firms to say their business and technology planning efforts were integrated and their IT investments over the last two years were driven by business initiatives rather than IT initiatives, according to a new study by management consulting firm A.T. Kearney, a subsidiary of EDS.
Nearly half of the European companies surveyed adopted technology after it had matured, considerably later than U.S. firms.
The Kearney report says the root of these differences is the fact that many European companies have distinct business units in the numerous countries throughout Europe. While this makes integration of strategy and technology more challenging, it doesn’t appear to be hampering the ability of European firms to grow their top lines as fast as U.S. firms since the average rate of top-line growth over the last five years for companies in both regions was 17 percent.
According to the survey the reason for the same top line growth rates is that European firms are investing heavily in CRM, mobility and sales applications that help improve customer relations and further integrate their multiple companies, customers and operations.
“European companies must continue using technology to bridge the cultural differences and business challenges across the region,” said Dirk Buchta, a Kearney VP based in Germany. “We expect closer integration of strategy and technology planning within European companies to evolve as current technology investments prove successful.”
The study was conducted with Rochester, N.Y.-based Harris Interactive in the fourth quarter of last year. The sample size of 144 consisted of 74 respondents from the United States and 70 from Europe. Survey respondents were board members and senior-level executives from European and American companies with $500 million (U.S.) or more in revenue.
The survey also shows companies integrating their business strategy and IT planning efforts are more likely to invest in innovation and growth activities, adopt new technology earlier and fuel business growth through IT-enabled innovation.
“Technology is pervasive in business today, but many companies continue to view the planning, funding and measurement of IT efforts as separate or only semi-related to the creation and planning of business strategy,” said Mark Livingston, a VP in Kearney’s strategy practice specializing in technology. “Companies with solid business-IT integration are better positioned to adopt and develop more innovative technology that confers a competitive advantage.”
In the study, only one third of the companies surveyed characterized their IT planning as integrated with business strategy. But among companies devoting the largest portion of their IT investments to innovation, rather than to cost or growth initiatives, 50 percent said their IT planning was fully integrated with corporate strategy. Nearly 70 percent of these “innovative” companies said they grew faster than key competitors over the last five years.
Another benefit of an innovation-focused IT strategy is the early adoption of technology and the rewards it brings. Thirty-five percent of the so-called innovative companies said they are early or leading edge adopters of technology, compared with 29 percent of overall survey participants.
Among these early technology adopters, 63 percent grew faster than their competitors over the past five years. Also, 60 percent of early adopters said their IT sponsorship is primarily business-driven rather than IT-driven.