Beyond Alignment: A Road Map For Business-Centric CIOs

Beyond Alignment: A Road Map For Business-Centric CIOs

The CIO and IT have a vital role to play as part of the business.”

For 30 years, CIOs have set up increasingly complex IT processes and industrialized IT operations in the hope of driving down costs while increasing IT and business alignment. While efforts toward alignment yield mixed results, business realities demand that CIOs move beyond alignment — to weave IT into the fabric of the business — or be relegated to managing technology.

The CIOs number-one job in the coming decades will be to drive business results — and by definition this requires CIOs to reshape IT for future success. Failure by CIOs to recognize this shift and shape a new IT for the future will result in turnover in IT leadership. CEOs can no longer afford IT leaders without the vision and influence to effect business change. To help CIOs make this transition, Forrester has collected a set of best practices to help you map your way forward.

THE AGE OF THE CUSTOMER REQUIRES CIOS TO CHANGE

Technology-fueled, customer-led disruption is arriving. In the era where the customer has tremendous influence over business strategy, you need to be customer-obsessed to retain customers and dominate markets; governments must become citizen-obsessed to remain in power; and taxpayers will demand accountability from tax-funded services. As organizations vie to establish market leadership, customers will develop brand loyalty through technology-enabled customer experiences as well as direct product or service perceived value and quality of supporting services. The CIO and IT have a vital role to play as part of the business — not as a service provider to the business, but as an integral part of the value delivery process to the customer. This shift requires CIOs to forget “alignment” — a focus on connecting the dots between IT and “the business” as if IT were just another technology vendor — and concentrate instead on shared business leadership. Forrester characterizes the change in how CIOs must think about the emerging role of IT as part of the customer-value ecosystem as a move toward “empowered business technology.”

CIOs Must Increase Focus On The Customer Experience, Revenue Growth, And Innovation

CIOs must help CEOs to view IT as more than an expensive overhead. When CEOs see IT as the route to the effective application of technology to drive business growth, they begin to see the potential for IT as a competitive differentiator in a complex business world.

• CEOs already understand the connection between technology and revenue. Integrating business and technology is increasingly critical to improving organizational performance. In study after study, CEOs identify technology integration within the business as a key differentiator in both reducing costs and increasing revenue.
• While a radically different business environment is coming into existence . . . Recent research suggests the business environment is growing increasingly complex — 80% of CEOs expect the level of complexity to increase over the next five years. This more complex world will depend on technology to help simplify the underlying complexity.
• . . . technology is often absent from strategy planning . . . Unfortunately, IT is all too often absent when leaders discuss business strategy options. Only 29% of firms report developing any kind of technology strategy in conjunction with the business strategy. As a result, IT is significantly disconnected from the rest of the business, and CIOs must bridge the gap.
• . . . and CIOs must help IT professionals to stop seeing themselves as separate. We hear this in almost every conversation with any IT professional — the constant reference to “IT and the business” as if they exist as two distinct entities. As Stuart McGuigan, CIO at CVS Caremark, puts it, “There’s no such thing as technology projects; they are all business projects with technology components.”

Move Beyond Traditional IT Methodologies To Drive Business Results

Over the past 30 years, IT has developed increasingly sophisticated processes and techniques to design, develop, and maintain business applications and run IT. With a shopping cart full of acronyms, CIOs have successfully implemented any one or more of a wide range of frameworks, methodologies, and practices such as ITIL, COBIT, ISO 17799, CMM, PRINCE, MSP, PMBOK, Balanced Scorecard, and Six Sigma. Yet despite all of these frameworks to run IT (or in some cases perhaps because of them), business units within our organizations continue to feel that IT cannot respond fast enough to needs of the business.

For example, when marketing professionals are asked if they believed IT is competent to support them, a significant number respond negatively — when asked to explain why, the most common responses are that IT and marketing speak different languages and that IT doesn’t understand the business.

IT’S TIME TO DEVELOP A NEW IT PHILOSOPHY

Many CIOs work hard to improve the support of IT’s internal “customers.” But empowered BT requires both CIOs and CEOs to adopt a different philosophy for leveraging technology within the enterprise. This new philosophy places increased focus on external customers and business outcomes. In the BT philosophy:

• IT becomes an intrinsic part of the business. In this approach, IT doesn’t sit apart from “the business” like some third-party technology vendor. This new way of thinking about IT places the CIO first and foremost as a business executive responsible for business performance, with a secondary responsibility for running and managing technologies and systems.
• The CIO’s primary concern is driving business and customer value. In a BT world, the CIO is primarily concerned with helping deliver value to the customer buying products or services from the business and with understanding how the perception of value is created in the mind of the ultimate consumer of the organization’s products and services. As one Fortune 1000 CIO puts it, in a BT world, IT governance ceases to exist; instead it is replaced by business governance with a technology component. In other words, the business manages the governance process for IT as an integral component of overall business governance.
• The CIO must work hard to demonstrate and communicate the business value of IT. The shift in philosophy cannot take place in isolation — pity the poor CIO who attempts to make the change while the CEO still expects the CIO to focus on keeping the lights on and reducing the budget year after year. But in order to get the CEO to understand how this change can help the organization, the CIO must coach the IT team on how to communicate effectively in business terms at all times.
• IT does not need to control and own all things technology. The BT philosophy requires CIOs to recognize what business they are in. As one CIO put it, “We’re all [business executives] trying to run a business — but we’re in financial services and not the technology business.” This awareness allows empowered BT CIOs to let go of the need to own and control all technology in the organization — instead these empowered BT CIOs see their role as helping their business source the best technology from the best supplier, which may include deciding to source it internally if that offers the best choice.

THREE ESSENTIAL ATTRIBUTES OF AN EMPOWERED BT ORGANIZATION

Although there are many ways to measure progress toward empowered BT, all CIOs making this journey successfully navigate their organizations along a pathway built around three core attributes — we’ve defined each attribute as a “step” on the road to empowered BT. IT teams must typically develop a degree of competency in each step before moving to the next. While moving to a new step, it is important to maintain proficiency in prior steps in order to reach empowered BT. Each step is made up of a combination of best practices that move the IT organization along the road toward BT. You may not master every best practice at each step, and your progression may not be sequential, but it is important to keep progressing along this path.

Step 1: Build A Solid Business-Oriented Foundation

These foundational tactics are necessary to begin the journey toward empowered BT. We call these foundational because it is difficult to get to step 2 without establishing competency in the majority of these tactics. For example, underlying everything you do as a CIO, you must have a reliable technology infrastructure; you must “keep the lights on.” Without it, your credibility is threatened — after all, if you cannot take care of the basic technology, who is going to trust you with influencing business strategy? But foundational tactics are not limited to keeping the lights on — that’s just where you begin; foundational steps include things like building your bench of business-oriented staff, establishing the relationship manager as a pivotal leadership role, and setting up a portfolio management approach to managing projects. The more foundational elements your team excels at, the more effective you will be in moving into step 2:

• Bring new business expertise into IT. The CIO of a major apparel manufacturer has refocused his team toward business expertise: “I have very few technologists on my staff.” Business analysts and relationship managers make up the largest component of his IT organization; only 10% of IT is “pure IT.” Instead of coding, these IT workers focus on proposing business changes. Another CIO told us, “I brought in a manager from another part of the organization with no IT background to carry the voice of the customer at our managers table within IT.”
• Put top talent in the role of IT consultants. BT CIOs recognize the importance of having their best, most business-savvy people working alongside the business leaders across the enterprise. However you define the role, as business relationship managers or consultants, it is critical that the rest of the IT team understand how important these people are to the success of the organization. As business units source more technology directly, these IT consultants become the face of IT, providing technology-oriented business insights to business leaders.
• Measure projects and IT using business metrics. A common practice among BT-oriented CIOs is to focus on business outcomes for all technology projects. In place of using measures like “on budget,” assess project success in terms of impact on the business, using metrics like increase in sales, increase in customer retention, or profit contribution. Instead of looking at on-time project delivery, use time-to-impact — measuring how long it takes for the investment to have a measurable impact on the business. In reporting IT results, CIOs must focus on the metrics that matter most to business executives, such as the cumulative business value of IT investment.
• Develop a portfolio approach to technology investments. Get out from under the burden of too many projects and too few resources — create a portfolio approach to project management and involve business sponsors in the decision-making process for how to allocate IT resources. Establish common goals with the business units in terms of business outcomes. Use a Balanced Scorecard to measure IT effectiveness and business impact.
• Build rigorous processes designed to deliver consistent results. There are people in IT who feel important by putting out fires — they yearn to have disasters to demonstrate their firefighting skills. However, this approach results in a downward spiral of service. In place of this approach, CIOs must ensure IT runs solid processes designed to deliver consistent high-performance results. You want your IT support team to be like the Maytag repairman. The most important table stakes for IT are keeping the lights on and delivering expected services on time and on budget. As one CIO we interviewed puts it, “Getting your house in order gets you some credibility and recognition. Once the engine room is humming, you can venture out of the engine room.”

Step 2: Rethink IT Communications To Develop Trust And Credibility

Effective communications are the most important and effective means of transitioning from IT to BT. Perhaps the most frequently asked question by CIOs making this journey is: “How can I educate my business partners about what IT can do for them?” While CIOs typically demonstrate excellent communication skills, struggling IT organizations often have systemic communications challenges. Effective communications allow the reliable and high-performing organization to begin the transition into a trusted business advisor. A key component of effective communication involves setting the IT team up for success:

• Shift IT from having discrete relationship events to becoming part of the conversation. The CIO of a large agribusiness has IT leaders sit in on the leadership staffs of the company’s commercial businesses, R&D, manufacturing, marketing, and finance (a foundational tactic); as a result, conversations are not discrete events; they are a constant ebb and flow. When cross-functional leadership teams meet, IT is part of the discussion.
• Make the end customer an IT responsibility. IT needs to focus more on the customer that consumes the products or services of the business and not so much on the internal customer. CIOs must help their teams understand the customer, allowing IT to contribute to increasing customer value with technology as the catalyst. Get IT staff out into the field to engage with customers and experience your organization’s products and services from the customer point of view. For example, Lidia Fonseca, SVP and CIO of Laboratory Corporation of America (LabCorp), goals her leadership team to talk with two end customers a month; “I like to observe our customers, how they interact with our business.” These interactions help IT develop innovations that transform the customer experience.
• Hire a marketing expert to communicate professionally. Sometimes CIOs need new roles within IT in order to put IT communications on the right track. One CIO we interviewed created a chief marketing officer (CMO) role within IT, reporting to the CIO, to manage all IT marketing and communications. The CIO framed the role specifically to help make IT an attractive place for top talent to come and work, making it possible to hire top talent at more competitive rates and so deliver more business value. The IT CMO should manage IT’s impact across all IT touchpoints — anywhere that a non-IT person comes into contact with IT staff or IT services. Each touchpoint represents an opportunity to delight or disappoint; it’s the IT CMO’s job to make sure all IT staff know how to delight.

  “If you don’t have someone trying to put a strategy on how to communicate services to the business with a consistent feel and consistent training material, you really should. It really has made it easier for [business partners] to understand what we are trying to do in IT.” (CIO of a US federal agency)

Step 3: Influence Business Strategy And Drive Innovation

The CIO who builds a solid foundation and develops teams who understand how to communicate effectively eventually earns the right to influence and help drive innovation for the business. These CIOs counsel senior executives on a wide range of business matters, not just technical subjects. The best practices in this third step center on driving technology into the culture of the organization so that business leaders consider IT to be a fundamental part of how they operate; there is no consideration for operating without IT at the table as a part of the business alongside marketing, HR, and finance.

• Plan business strategy, not IT strategy. As IT transitions from IT to BT, the focus of strategy planning must shift away from developing an IT strategy in response to a business strategy and toward developing a business strategy with a technology component. Use business capability maps to open up conversations with business leaders around strategies to achieve business goals — and explicitly explore how capability changes, perhaps supported by technology, might offer new strategy choices.
• Become the chief innovation officer. One CIO we interviewed describes himself as a “chief innovation officer” because he is so driven to support enterprise innovation. “We have an ideation tool and a cloud-sourcing tool; we are throwing out problems and seeking solutions.” Establish an enterprise social innovation network to collect and move ideas from concept into production. Make sure your IT teams not only understand the importance of supporting innovation in the organization, but also of innovating within IT — set up an innovation council within IT to manage ideas through a formal innovation process; designate time for all IT employees to work on innovation ideas of their own. Recognize employees for innovation efforts. Instead of highlighting why things cannot be done, IT must become the team that comes up with outside-the-box thinking to find ways to make things possible.
• Redefine IT’s role as a service. An empowered BT organization requires IT to move from a production-oriented model — where technology solutions are built in-house — toward a model where IT operates as a service, helping business units source the most appropriate technology for their business need, with many sourcing options open, including in-house if that is the optimum solution for the business unit. But rethinking IT as a service requires an understanding of service design, delivery, and the seven P’s of services marketing. IT services must be co-developed and co-created with business unit partners to deliver business outcomes linked directly to the enterprise goals and objectives.

  As the CIO at a major financial institution summed up, “A lot of people say ‘we can’t, we can’t, we can’t'; we now say ‘we can and here are some options.’”

THERE ARE SNAKES AND LADDERS ALONG THE JOURNEY TO EMPOWERED BT

The journey to empowered BT isn’t always straightforward — sometimes opportunities present themselves that allow you to accelerate down the path toward BT such as when a new CEO joins the organization with the expectation that IT is part of every business conversation — we call these “ladders” since they allow you to climb up the path. Similarly, there are setbacks that can push even the best organization back down the path, such as when your email server goes dark for a day and your credibility as technology leader is questioned — we call these “snakes” because they bite you when you least expect it and you slide backward as a result. Taking both “snakes” and “ladders” into account, it’s possible to see the path to BT as a game board similar to the ancient game of Moksha-Patamu (AKA “Snakes and Ladders” or “Chutes and Ladders”). While ladders may help you skip forward on the journey, you still need to master each step in order to avoid sliding backward.

Taking these snakes and ladders in your stride is all part of becoming a resilient BT organization. As one CIO told us, “We’ve experienced three management changes in my six years as CIO. Each new leadership team of group of individuals brings predispositions and biases about IT. My job is to normalize that — this is the culture of technology in the company. We’re better regarded today than two years ago in spite of the changes.”