What’s Hard About IT Alignment?

What’s Hard AboutIT Alignment? Presenter: Dr. Richard L. (Ric) Routh Director, The Institute for CIO Excellence

Review:When your CEO says… • “I want you to use I.T. resources to deliver strategic value.” • He defines “value” as he learned it in the business text books he studied in college • Value is classically defined in the business world as: • Increasing profits • Increasing the size of the customer base • Improving the brand.

Review: Job Definitions • A good I.T. director is focused on delivering I.T. services that are: • Reliable • Secure • Affordable • A good CIO is focused on using I.T. resources to create strategic business value.

Competitive vs. Non-Competitive CIOs • A non-competitive (cost center) CIO: • Has an I.T. budget of $100M and creates $10M/year in new profits • Or produces $20M worth of new customers/yr • And justifies this performance with statements like, “Its hard to focus on expanding the railroad if you can’t make the trains run on time.” • A Competitive (profit center) CIO: • Has an I.T. budget of $100M and creates $200M/yr in new profits and new customers • And can prove it with legitimate, believablemetrics.

Review: A Competitive CIO • Knows that reliable, secure and affordable I.T. services are critically important to the company, • but s/he delegates these challenges to competent I.T. Directors • so s/he can focus on strategic value creation.

A Process for Strategic Value Creation • This all leads us to realize we need a process for strategic value creation • It needs to be a tried-and-true process (proven best practices) • It needs to be simple in concept and straight-forward in implementation (as close as you can get to a “turn-the-crank” process).

Review: What I.T. Alignment is Not! • What do you say to the CIO who says, “Yes, I’m practicing I.T. Alignment because all the projects in my portfolio are addressing real business needs. The business units identified these needs and I’m using our I.T. resources to satisfy those needs. Therefore, I have successfully aligned I.T. with the business.”

Review:Not I.T. Alignment! • So, why is it not I.T. Alignment when a CIO says, “I am aligned because all the projects in my portfolio respond to legitimate business needs that were requested by the business units?” • Answer: Very likely the business units that requested those projects were not thinking strategically and most certainly were not thinking through a process for the optimum use of resources to create strategic value. So…you’ve most likely got a bunch of tactical projects in your I.T. portfolio.

Making sure I.T. is aimed at STRATEGIC value • How does the CIO ensure that s/he is aimed at creating strategic value? .

Review:The 5-Steps of I.T. Alignment • Step 1: Get a list of the strategic goals of the company • The list must be short (preferably not more than 3 to 5 goals) • The goals must be measurable • The goals must have specific timeframes • Example of an incomplete strategic goal: “Increase profitability of the company” • Example of a better strategic goal: “Increase profits by 15% in the next 12 months”.

Example of a good Strategic Goal List • 1. Increase annual profits by 12% by December 2009 • 2. Increase our market share from 14% to 15% by June 2010 • 3. Increase our brand awareness in our target consumer group nation-wide from 7% (currently) to 10% by December 2009.

Review:The 5-Steps of I.T. Alignment • Step 2: Get a list of the strategic business initiatives that each CXO proposes to help achieve the stated strategic business goals • Example strategic business initiative that might come from the CMO: “Launch a new $15M national advertising campaign designed to increase our brand awareness among target market consumers” • Remember: “No man is as smart as a group” • So take advantage of the synergy of the entire executive team.

Review:The 5-Steps of I.T. Alignment • Step 3: Brainstorm to find hidden opportunities for I.T. to help accomplish the goals and initiatives from Steps 1 & 2 • We use “ITAB” groups and collaborative software to identify as-yet undiscovered applications of new I.T. technologies that will significantly help accomplish our strategic goals and initiatives • An “ITAB” group might consist of CIO, an I.T. project manager or two, some business unit leaders and a relatively young I.T. geek.

Review:The 5-Steps of I.T. Alignment • Step 4: Prioritize and select the winners from the suggestions that came from the ITAB group(s), and then redeploy I.T. resources to develop them • It would be best to get new funding for these strategic winners, but in reality, the CFO usually says something like, “You have your own budget. Rearrange your priorities if you want to.”

Review:The 5-Steps of I.T. Alignment • Step 5: Plan for, institute and execute a serious post project audit policy • Law of Nature: If you measure it, the likelihood of success goes way up (and others will take more notice of your successes) • Seeking accountability is the mark of a truly effective executive.

Review:The 5-Steps of I.T. Alignment • Step 1: Get a list of the strategic goals of the company • Step 2: Get a list of the strategic business initiatives that each CXO proposes to help achieve the stated strategic business goals • Step 3: Brainstorm to find hidden opportunities for I.T. to help accomplish the goals and initiatives from Steps 1 & 2 • Step 4: Prioritize and select the winners from the suggestions that came from the ITAB group(s), and then redeploy I.T. resources to develop them • Step 5: Plan for, institute and execute a serious post project audit policy.

For Class Discussion: • This simple 5-step process begs the question, “What’s the catch?” • This seems too simple. Where are the “gotcha’s”? Where does this get hard? • So,...Why isn’t EVERYONE doing this simple 5-step I.T. Alignment process?

So,...Why isn’t EVERYONE doing this simple 5-step I.T. Alignment process? • Some don’t know about it • For many, the risk to change APPEARS to be greater than the risk to stay focused on operational excellence • Step 4 is painful (this will require the CIO to exhibit leadership, courage, perseverance, and political skill) • Step 1 is painful (this will require the CIO to exhibit leadership, courage, perseverance, and political skill) • Step 2 is painful (this will require the CIO to exhibit leadership, courage, perseverance, and political skill) • Step 3 is painful (this will require the CIO to exhibit leadership, courage, perseverance, and political skill) • Step 5 is painful (this will require the CIO to exhibit leadership, courage, perseverance, and political skill).

Now that the new projects portfolio list has more projects than IT has resources to build, a cut-off line needs to be established. The projects that fall below this line will have to be delayed until next budget year (whatever that means) or cancelled.

Step 4 is Painful • (Step 4: Prioritize and select the winners from the suggestions that came from the ITAB group(s), and then redeploy I.T. resources to develop them) • So, … Why is this a painful proposition?

Step 4 requires Leadership, Courage and Perseverance • Your action plan to resolve the pain of step 4: • (1) You (the CIO) will begin to get a reputation for being a hard-line strategic value creation proponent—THIS IS A VERY GOOD THING FOR YOUR FUTURE AND THE FUTURE OF IT IN YOUR COMPANY!!! • (2) I.T. will begin to be viewed by the CFO and other CXOs as a strategically oriented profit center (as opposed to a cost center that only provides I.T. services)-- THIS IS ALSO A VERY GOOD THING FOR YOUR FUTURE AND THE FUTURE OF I.T. IN YOUR COMPANY! • (3) When the COO has to face the consequences of not getting his new high-IRR (35%) inventory system this year, s/he may decide to find the money in his/her budget to fund that IT system or campaign to get the CFO to find more money for IT.

Step 4 requires Leadership, Courage and Perseverance (4) When your people see their new technology (the LAN, WAN and Desktop upgrades) will not be happening this year because it is more important to be working on high-IRR strategic IT systems, they will begin to get the message that creating strategic value for the company REALLY IS what IT is all about—this is a VERY good thing (in the long run) (5) When the other CXOs see the commitment (and dust flying) in the wake of your new IT Alignment initiative, they will become more interested in participating in a more robust IT Governance process in the future. This will give them better access to these (IT) strategic resources and keep them from being blind-sided by reorganized priorities in the future. This is a VERY good thing for you as it will build significant political capital for you in the future.

Step 1 is Painful • (Step 1: Get a list of the strategic goals of the company) • What’s hard about getting a short list? (Why is this important?) • What’s hard about getting metrics for success, and timetables assigned to each strategic goal? (Why is this important?) • What happens if you don’t get a short, measurable list of strategic goals—that the CEO owns and all other CXOs support? • Why will this require the CIO to exhibit leadership, courage, perseverance, and political skill?

Step 2 is Painful • (Step 2: Get a list of the strategic business initiatives that each CXO proposes to help achieve the stated strategic business goals) • Why might the other CXOs resist telling you about their planned strategic business initiatives? • Why is it important for the other CXOs to share their strategic business initiatives with you? • Can you see that this will require the CIO to exhibit leadership, courage, perseverance, and political skill!

Step 3 is Painful • (Step 3: Brainstorm to find hidden opportunities for I.T. to help accomplish the goals and initiatives from Steps 1 & 2) • What’s hard about this? • Where is the risk to the CIO in this? • This will require the CIO to exhibit leadership, courage, perseverance, and political skill!

Step 5 is Painful • (Step 5: Plan for, Institute and execute a serious post project audit policy) • Decide up-front (before you get the project funded) • What the success metrics will be • Who will collect and report them • When and to whom they will be reported • Who is responsible to “tweak” the project if the measured results fall short of the expected results • Why would you expect this to be painful? • Will this will require the CIO to exhibit leadership, courage, perseverance, and political skill!

Leadership: A necessary CIO Job Skill • Remember: Leadership is born in a vacuum of leadership • A real leader recognizes the need for leadership and just starts leading • A modern competitive CIO is a real leader • (Risk averse people never become great leaders!).

Any questions?

What’s Hard About IT Alignment?