Please forgive me readers for abandoning you for the last few weeks. But Tom (my partner) and I were asked by Cutter Consortium to write a couple of articles for them. Cutter normally charges for access to their posted articles. However, they have generously agreed to provide free access to you my blog readers. Those articles are now available at: click to go to Cutter website.
We chose two related topics. 1) The Agile IT Organization: Diffusion into the IT-Savvy Business, and 2) Agile Alignment. Both articles are posted on Cutter's website in their Business-IT Strategies Advisory Service Executive Update section as Vol. 8, No. 22 and Vol. 10 No. 21.
The articles are too long to post here. However, the Agile IT Organization deals with the evolution of the IT organization from Centralized, to Decentralized, to Dispersion, to Diffusion (with multiple iterations among the choices for most organizations). Centralized and Decentralized need no definitions. The Dispersed organization was defined by us (CogniTech) in the early 90's and is defined as: Dispersing some of the IT functions (for example single function development) into the individual business units. Diffusion as defined by Peter Weill and Sinan Aral of MIT's Center for Information Systems Research as diffusion of IT into the business where IT is done by business users. This requires an IT-Savvy organization defined by the above authors as "an organization in which there is extensive IT use for communication, more digitized business transactions, greater use of the Internet, higher IT skills of both business and IT staff, and more senior management involvement in IT decisions". We discuss the benefits, difficulties, dimensions, and requirements for an agile IT organization.
In our second article, we deal with agile IT alignment and deal with the issue of why (even when an organization can get aligned with business goals) is it so difficult to stay aligned. In essence, we conclude that: "In the grand scheme of things, organizations align to their external worlds by setting goals for achievement. Senior managers set the big goals, while operating managers translate these into their specific operating goals. In a perfect world, these would all point in the same direction and would never change. Reality poses a big problem, however, because external worlds do change, and goals change faster than you can imagine, even in big organizations. So if you had perfect alignment today, you might be out of whack six months or a year from now. Thus, IT-business alignment must be agile -- ever vigilant about shifting business goals." In this article we discuss the process by which IT can maintain alignment.
Please take the opportunity to read these articles in full on the Cutter Consortium website.
Monday, December 3, 2007
Friday, October 26, 2007
Outsourcing and Innovation
The October 15 issue of CIO Magazine, has a thought provoking article entitled “What Price Innovation?” by Stephanie Overby. In it the author makes the following points:
1. Outsourcers are not motivated to innovate because they make their profit through standardization among clients.
2. If they were somehow motivated, innovation is made difficult because senior business leaders are unable to manage the outsourcer in a manner that encourages innovation-- (our findings are more specific in that senior business leaders are reluctant to share business strategy with a vendor).
3. Contracting for innovation is difficult if not impossible.
4. Vendors will only innovate to the extent it saves them money or helps them introduce new products.
All this confirmed our findings in a survey we completed in 2002 in which we scored the level of and satisfaction with innovation provided by outsourcers. We measured 4 elements of innovation provided by the outsourcer:
1. Product Delivery Innovation – innovation in support of delivering existing products and services
2. Process Improvement Innovation – innovation in support of improvement in existing business processes
3. Competitive Innovation – innovation in support of improving competitive advantage
4. Overall Creativity – generation of new ideas for IT usage within the organization
On a scale of 1-7, the overall score over the 12 organizations and 123 respondents surveyed was 2.7 (1.3 points below an average 4.0 score) on the 4 elements above. The scores ranged from an average low of 2.3 for Process Improvement Innovation to 3.2 on Overall Creativity. However, the innovation factor rated most important by the several hundred respondents was Competitive Innovation with an average score of 2.5. By comparison, the average scores given to the outsourcers in our survey for Delivery to Contract (meeting SLA’s etc.) averaged 4.9 (almost a point above a 4.0 average score) on the same 1-7 scale and 2.2 points higher than their score on Innovation.
The obvious conclusion – IT innovation cannot be successfully outsourced. At minimum, internal IT needs to include keeping abreast of emerging technology and it implications for leveraging business strategy for both the long and short term. Also, IT architecture, standards, and enterprise-wide infrastructures cannot be effectively outsourced. In short, nothing that is strategic to the individual business/organization should be outsourced where innovation and/or leading edge thinking or technology is required.
Give me your thoughts.
1. Outsourcers are not motivated to innovate because they make their profit through standardization among clients.
2. If they were somehow motivated, innovation is made difficult because senior business leaders are unable to manage the outsourcer in a manner that encourages innovation-- (our findings are more specific in that senior business leaders are reluctant to share business strategy with a vendor).
3. Contracting for innovation is difficult if not impossible.
4. Vendors will only innovate to the extent it saves them money or helps them introduce new products.
All this confirmed our findings in a survey we completed in 2002 in which we scored the level of and satisfaction with innovation provided by outsourcers. We measured 4 elements of innovation provided by the outsourcer:
1. Product Delivery Innovation – innovation in support of delivering existing products and services
2. Process Improvement Innovation – innovation in support of improvement in existing business processes
3. Competitive Innovation – innovation in support of improving competitive advantage
4. Overall Creativity – generation of new ideas for IT usage within the organization
On a scale of 1-7, the overall score over the 12 organizations and 123 respondents surveyed was 2.7 (1.3 points below an average 4.0 score) on the 4 elements above. The scores ranged from an average low of 2.3 for Process Improvement Innovation to 3.2 on Overall Creativity. However, the innovation factor rated most important by the several hundred respondents was Competitive Innovation with an average score of 2.5. By comparison, the average scores given to the outsourcers in our survey for Delivery to Contract (meeting SLA’s etc.) averaged 4.9 (almost a point above a 4.0 average score) on the same 1-7 scale and 2.2 points higher than their score on Innovation.
The obvious conclusion – IT innovation cannot be successfully outsourced. At minimum, internal IT needs to include keeping abreast of emerging technology and it implications for leveraging business strategy for both the long and short term. Also, IT architecture, standards, and enterprise-wide infrastructures cannot be effectively outsourced. In short, nothing that is strategic to the individual business/organization should be outsourced where innovation and/or leading edge thinking or technology is required.
Give me your thoughts.
Monday, September 24, 2007
New Survey on IT Alignment
IDG Research has conducted a new survey about IT alignment. The findings published in a white paper at: click here for whitepaper are very consistent with our own data collected over the last 25 years. Some of their findings are as follows:
1. Companies that are well-aligned typically include the CIO or senior IT person as part of the executive committee. (See our Blog post of Sept. 13)
2. In well-aligned companies, IT is brought into new projects from the beginning rather than as an afterthought.
3. Frequent communication between IT and business is essential to successful alignment, and it needs to take place at all levels within the organization.
Other findings include data regarding the importance of IT alignment -- ..."81% say alignment is critical or high priority" and "over 50% say aligning IT with business goals will increase in importance over the next 18 months". Still others cite the IT poor success rate organizations have had with implementing and maintaining IT alignment -- ..."only 15% say they have been very successful at aligning IT and business goals".
The survey finds that, "One of the challenges to alignment is that the actual business goals of the enterprise are not always clear to IT, and they're not always well articulated within the organization as a whole."
How true this is. We have found in our work that as soon as you mention the business strategic goals the business or IT manager's mind leaves their real world and begins company-speak. Furthermore, in our experience, when the business managers requests and IT project, s/he is not thinking about the company goals (one reason why IT project requests are not aligned with business goals) but is thinking about today's big problem.
What is needed and the approach we have used over the years to bypass this problem is to work with the top operational goals for each unit within the organization -- things that have to be achieved in order for their organization/function/etc to be successful. Regardless of what is written in the strategic plan, or communicated by senior management, the operational goals are the ones driving the organization because these are the things the business managers are "doing".
IT therefore has a problem. Whose goals does it align with if operational and strategic goals are inconsistent. By identifying the operational goals, IT, operational business managers, and senior managers, have a means of measuring whether they are on the same page. Let me cite a story as example:
One of our clients in an electrical utility industry who used us over a period of years found in their initial baseline survey that a new unit that had been established to "pursue new business ideas" had operational goals that dealt primarily with getting more efficient and cost reduction and they had few operational goals dealing with revenue increases or competitive advantage. When this data was presented to the Senior Management Committee they were shocked. A discussion among themselves revealed that the business managers they had assigned to the new unit where mainly from the old power generation unit. These managers where unable to get out of their "old think" box in order to accomplish the strategic purpose for which the unit had been established. The Senior Management Committee was unaware until then that these managers were just the wrong people for the job. It was their fault not the fault of the business manager's chosen.
Management changes were made and more entrepreneurial managers put in place. At the next measurement, the goals shift was toward revenue generation and competitive advantage. Because IT had the strategic/operational goals for this unit, it could design projects to quick achieve these goals. The results: new profitable products up within one year and spin-off of a whole new profitable business within a few years.
1. Companies that are well-aligned typically include the CIO or senior IT person as part of the executive committee. (See our Blog post of Sept. 13)
2. In well-aligned companies, IT is brought into new projects from the beginning rather than as an afterthought.
3. Frequent communication between IT and business is essential to successful alignment, and it needs to take place at all levels within the organization.
Other findings include data regarding the importance of IT alignment -- ..."81% say alignment is critical or high priority" and "over 50% say aligning IT with business goals will increase in importance over the next 18 months". Still others cite the IT poor success rate organizations have had with implementing and maintaining IT alignment -- ..."only 15% say they have been very successful at aligning IT and business goals".
The survey finds that, "One of the challenges to alignment is that the actual business goals of the enterprise are not always clear to IT, and they're not always well articulated within the organization as a whole."
How true this is. We have found in our work that as soon as you mention the business strategic goals the business or IT manager's mind leaves their real world and begins company-speak. Furthermore, in our experience, when the business managers requests and IT project, s/he is not thinking about the company goals (one reason why IT project requests are not aligned with business goals) but is thinking about today's big problem.
What is needed and the approach we have used over the years to bypass this problem is to work with the top operational goals for each unit within the organization -- things that have to be achieved in order for their organization/function/etc to be successful. Regardless of what is written in the strategic plan, or communicated by senior management, the operational goals are the ones driving the organization because these are the things the business managers are "doing".
IT therefore has a problem. Whose goals does it align with if operational and strategic goals are inconsistent. By identifying the operational goals, IT, operational business managers, and senior managers, have a means of measuring whether they are on the same page. Let me cite a story as example:
One of our clients in an electrical utility industry who used us over a period of years found in their initial baseline survey that a new unit that had been established to "pursue new business ideas" had operational goals that dealt primarily with getting more efficient and cost reduction and they had few operational goals dealing with revenue increases or competitive advantage. When this data was presented to the Senior Management Committee they were shocked. A discussion among themselves revealed that the business managers they had assigned to the new unit where mainly from the old power generation unit. These managers where unable to get out of their "old think" box in order to accomplish the strategic purpose for which the unit had been established. The Senior Management Committee was unaware until then that these managers were just the wrong people for the job. It was their fault not the fault of the business manager's chosen.
Management changes were made and more entrepreneurial managers put in place. At the next measurement, the goals shift was toward revenue generation and competitive advantage. Because IT had the strategic/operational goals for this unit, it could design projects to quick achieve these goals. The results: new profitable products up within one year and spin-off of a whole new profitable business within a few years.
Thursday, September 20, 2007
IT Alignment Confusion
I have just read an article on the "CIO Insight" website that reflects the utter confusion about what IT Alignment really is. In this article (see "Companies Falter at Aligning IT to Business" by Brian P. Watson at: click here to go to article:, the author differentiates between IT effectiveness and IT alignment.
By all accepted definitions, IT effectiveness is defined as "IT doing the right things" rather than doing things right (which is efficiency). Accepting that definition for IT effectiveness, it has been our experience that IT alignment and IT effectiveness are two sides of the same coin - therefore, they cannot be in conflict.
If IT is doing the right things, they are aligned with business strategy because the business strategy defines the "right things" that business should be doing and IT should be supporting.
Therefore, if you have a measure of IT effectiveness, you have a measure of IT alignment.
Our measure of IT Alignment/IT Effectiveness shows how well IT is supporting the top 3 business goals of senior business managers. We have tracked that measure for almost 25 years in almost 200 organizations and it has been consistent with improved profit margins, ROI, EPS, etc.
The definition of IT effectiveness used in this article is as follows: "getting projects done as specified, on budget and on schedule". This definition is consistent with the accepted definition of IT efficiency - e.g. how well it is doing the things it is doing -- doing things right.
According to this definition of IT effectiveness in this article is actually IT efficiency. As such, I completely agree with the results of the Bain survey quoted in the article as they are consistent with our data collected over this last 25 years. However, instead of comparing IT effectiveness and IT alignment, the article is actually dealing with IT efficiency and IT alignment -- two very different things.
By all accepted definitions, IT effectiveness is defined as "IT doing the right things" rather than doing things right (which is efficiency). Accepting that definition for IT effectiveness, it has been our experience that IT alignment and IT effectiveness are two sides of the same coin - therefore, they cannot be in conflict.
If IT is doing the right things, they are aligned with business strategy because the business strategy defines the "right things" that business should be doing and IT should be supporting.
Therefore, if you have a measure of IT effectiveness, you have a measure of IT alignment.
Our measure of IT Alignment/IT Effectiveness shows how well IT is supporting the top 3 business goals of senior business managers. We have tracked that measure for almost 25 years in almost 200 organizations and it has been consistent with improved profit margins, ROI, EPS, etc.
The definition of IT effectiveness used in this article is as follows: "getting projects done as specified, on budget and on schedule". This definition is consistent with the accepted definition of IT efficiency - e.g. how well it is doing the things it is doing -- doing things right.
According to this definition of IT effectiveness in this article is actually IT efficiency. As such, I completely agree with the results of the Bain survey quoted in the article as they are consistent with our data collected over this last 25 years. However, instead of comparing IT effectiveness and IT alignment, the article is actually dealing with IT efficiency and IT alignment -- two very different things.
Thursday, September 13, 2007
IT Alignment Failure Factor - #4 & #5
I have not been posting the IT alignment failure factors in any sort of priority order but instead, responded to articles. One on the InformationWeek Blog site intrigued me -- "Are CIOs Disappearing?' by Bob Evans ( see original InfoWeek Blog article:). In this article, he points out the big drop in the number of CIOs listed among top management on business websites. I have left a comment on the blog site, but the following is a more in-depth analysis:
Failure reason #4: IT needs to report at the correct level of the organization and be managed on the correct criteria.
Over hundreds of organizations we have consistently found that IT needs to report at high level in the organization -- preferably to the CEO or COO. There have been cycles over the years of IT reporting to the CFO. These cycles have generally been consistent with business downturns and downsizing when IT is being managed on the basis of cost.
It is critical that IT be managed based on its contribution to the organization rather than solely on cost. IT can contribute equally to revenue-increasing projects, quality improvement projects, competitive advantage projects as they can to efficiency and cost control projects.
IT budgets should be based on the IT projects required to be completed in order for the business to successfully achieve its top goals and objectives. This cannot be achieved by setting an arbitrary dollar amount, but must be based on the business/IT projects that must be completed for the business to profitable or meet its mission objectives.
In our experience, organizations that are adequately aligned have no IT budget issues. Projects get funded rather than IT organizations.
When the CIO does not report at a high enough level results in yet another typical failure factor:
Failure reason #5: IT not involved with the business planning process.
Of all the failure reasons this one probably has the biggest impact.
If IT does not sit at the table as equals with business managers during planning they cannot bring the technical capabilities and solutions to the business goals. In fact they cannot even clearly understand the goals themselves in order to provide the IT expertise upon which business success is now so critically dependent. Our data shows that less than 2% of business projects can be successfully completed without IT contribution. When IT participates in planning and conducts the type of alignment (Planning Interaction) meetings and processes we recommend, profitability and other outcome measures improve significantly. In fact, companies we have tracked that have implemented these procedures have experienced over $1.5 Billion higher profits over the years tracked. Companies that have succumbed to one or more of the failure reasons above have registered declines in profitability over the years tracked.
Let me know your thoughts.
Failure reason #4: IT needs to report at the correct level of the organization and be managed on the correct criteria.
Over hundreds of organizations we have consistently found that IT needs to report at high level in the organization -- preferably to the CEO or COO. There have been cycles over the years of IT reporting to the CFO. These cycles have generally been consistent with business downturns and downsizing when IT is being managed on the basis of cost.
It is critical that IT be managed based on its contribution to the organization rather than solely on cost. IT can contribute equally to revenue-increasing projects, quality improvement projects, competitive advantage projects as they can to efficiency and cost control projects.
IT budgets should be based on the IT projects required to be completed in order for the business to successfully achieve its top goals and objectives. This cannot be achieved by setting an arbitrary dollar amount, but must be based on the business/IT projects that must be completed for the business to profitable or meet its mission objectives.
In our experience, organizations that are adequately aligned have no IT budget issues. Projects get funded rather than IT organizations.
When the CIO does not report at a high enough level results in yet another typical failure factor:
Failure reason #5: IT not involved with the business planning process.
Of all the failure reasons this one probably has the biggest impact.
If IT does not sit at the table as equals with business managers during planning they cannot bring the technical capabilities and solutions to the business goals. In fact they cannot even clearly understand the goals themselves in order to provide the IT expertise upon which business success is now so critically dependent. Our data shows that less than 2% of business projects can be successfully completed without IT contribution. When IT participates in planning and conducts the type of alignment (Planning Interaction) meetings and processes we recommend, profitability and other outcome measures improve significantly. In fact, companies we have tracked that have implemented these procedures have experienced over $1.5 Billion higher profits over the years tracked. Companies that have succumbed to one or more of the failure reasons above have registered declines in profitability over the years tracked.
Let me know your thoughts.
Thursday, September 6, 2007
IT Alignment Failure Factor - from Cutter Consortium article
An article from the Cutter Consortium by Bob Benson and Tom Bugnitz entitled "Engaging Business Management" outlines a failure factor they have observed in organizations attempting to align IT with business. This failure factor is summarized in the following quote from the article: " We continue to confront a basic problem in IT management: business managers aren't much intrested in participating in prioritization alignment, and planning exercises for IT.... While the corporate CFO, and possibly the CEO do worry about IT costs, individual business unit managers who consume IT services simply aren't interested."
The authors attribute this lack of interest to the fact that, "IT costs represent only 2%-5% of the total company budget." Their recommendation is to:
"1. Get the IT cost comparisons right
2. Focus on making IT cost decisions"
Unlike these authors, we have not had difficulty in engaging the business unit managers in alignment exercises unless IT's credibility is below the critical threshold (see CogniTech's website at http://www.cognitechcorp.com for more on IT Credibility). We find business managers are willing to engage with IT in alignment work when the meeting is focused on identifying the capabilities and projects IT can bring to the business manager's goal accomplishment. Business managers are eager to find out what IT can bring to the table to enable them to successfully complete their goals. They are less interested in meeting with IT to prioritize a list of IT projects - regardless of where the list originated. Meetings in which IT projects are jointly identified by business managers and IT managers do not require additional prioritization meetings since the goal priority establishes IT project priority.
While I agree with the authors that it is important that the IT cost metrics and cost decisions are right -- the importance of IT to the organization resides more in IT's ability to leverage every function of the organization and the organization as a whole to perform better and to achieve its goals. The measure for this leverage is found in a measure of IT Contribution rather than cost. (See Gartner publication "Realizing the Benefits of Project and Portfolio Management", Matt Light, Bill Rosser, Simon Hayward, January 2005 - and CogniTech publications on our website http://www.cognitechcorp.com).
The authors attribute this lack of interest to the fact that, "IT costs represent only 2%-5% of the total company budget." Their recommendation is to:
"1. Get the IT cost comparisons right
2. Focus on making IT cost decisions"
Unlike these authors, we have not had difficulty in engaging the business unit managers in alignment exercises unless IT's credibility is below the critical threshold (see CogniTech's website at http://www.cognitechcorp.com for more on IT Credibility). We find business managers are willing to engage with IT in alignment work when the meeting is focused on identifying the capabilities and projects IT can bring to the business manager's goal accomplishment. Business managers are eager to find out what IT can bring to the table to enable them to successfully complete their goals. They are less interested in meeting with IT to prioritize a list of IT projects - regardless of where the list originated. Meetings in which IT projects are jointly identified by business managers and IT managers do not require additional prioritization meetings since the goal priority establishes IT project priority.
While I agree with the authors that it is important that the IT cost metrics and cost decisions are right -- the importance of IT to the organization resides more in IT's ability to leverage every function of the organization and the organization as a whole to perform better and to achieve its goals. The measure for this leverage is found in a measure of IT Contribution rather than cost. (See Gartner publication "Realizing the Benefits of Project and Portfolio Management", Matt Light, Bill Rosser, Simon Hayward, January 2005 - and CogniTech publications on our website http://www.cognitechcorp.com).
Thursday, August 16, 2007
We commend an article for your review
There is a very good article in the August, 2007 issue of Baseline magazine entitled, "The CIO and CEO, In Sync", by Robert Hertzberg. In it, he lists the "10 core principles" for making IT alignment work. For those of you familiar with our work, these will look very familiar indeed. For others, this is a good starting list.
Comments:
1. I would have some disagreement in the priority order of the items listed, but none with those listed.
2. Certainly the list is not exhaustive as there are some items more important than some of those listed. A couple of these include:
- IT and business working together as a team to identify and prioritize IT projects based on business strategic goals.
- Dynamic review of IT projects against changing business goals (quarterly at best and at least twice a year).
3. On his "Best Practice #2 - Establish an IT Steering Committee" -- We certainly agree with this one. In fact, it is this group that has the power to keep IT and business aligned with business goals (supported of course by the IT/business teams within each of the business units.)
4. "Best Practice #6 - Install a high-level IT liaison in every business unit" -- To us this is the IT team member of the IT/business team within each unit that initiates IT projects for review by the IT Steering Committee. The mixed results we have experienced with these liaisons usually arise because either the wrong individual is assiged, they are assigned at the wrong level, they are given too little authority, or they are given no budget.
5. "Best Practice #4 - Measure the right things" -- of course we think this in critical. You manage what you measure and if IT alignment is not measured you can't manage it.
6. "Best Practice #7 - Distribute a list of ongoing projects to the business as well as IT" -- this is OK as long as these projects don't take on a life of their own and become sacred. When goals change, IT and business must be willing to move on from previously blessed projects.
7. "Best Practice #9 - Create multi-discipliniary teams for high-priority projects" -- When this is done properly, I have seldom seen a project fail. Properly includes (as the author points out) co-location of the team members as well as one point not included e.g. rotating team leadership between IT and business managers depending upon the project's timeline. For example, Business lead during design and IT lead during development etc.
But all-in-all, I commend this article to you. We invite your comments.
Comments:
1. I would have some disagreement in the priority order of the items listed, but none with those listed.
2. Certainly the list is not exhaustive as there are some items more important than some of those listed. A couple of these include:
- IT and business working together as a team to identify and prioritize IT projects based on business strategic goals.
- Dynamic review of IT projects against changing business goals (quarterly at best and at least twice a year).
3. On his "Best Practice #2 - Establish an IT Steering Committee" -- We certainly agree with this one. In fact, it is this group that has the power to keep IT and business aligned with business goals (supported of course by the IT/business teams within each of the business units.)
4. "Best Practice #6 - Install a high-level IT liaison in every business unit" -- To us this is the IT team member of the IT/business team within each unit that initiates IT projects for review by the IT Steering Committee. The mixed results we have experienced with these liaisons usually arise because either the wrong individual is assiged, they are assigned at the wrong level, they are given too little authority, or they are given no budget.
5. "Best Practice #4 - Measure the right things" -- of course we think this in critical. You manage what you measure and if IT alignment is not measured you can't manage it.
6. "Best Practice #7 - Distribute a list of ongoing projects to the business as well as IT" -- this is OK as long as these projects don't take on a life of their own and become sacred. When goals change, IT and business must be willing to move on from previously blessed projects.
7. "Best Practice #9 - Create multi-discipliniary teams for high-priority projects" -- When this is done properly, I have seldom seen a project fail. Properly includes (as the author points out) co-location of the team members as well as one point not included e.g. rotating team leadership between IT and business managers depending upon the project's timeline. For example, Business lead during design and IT lead during development etc.
But all-in-all, I commend this article to you. We invite your comments.
Tuesday, July 31, 2007
IT Alignment Dialog - Failure Factor #3
This is perhaps the most frequent and the most controversial of the failure factors we have uncovered in the last 25 years.
Failure reason #3: Managerial, cultural and attitudinal roadblocks.
While both business and IT prefer the view that all IT issues can be resolved with a technical solution, the truth is unfortunately very different. Most of reasons for failure of IT and business to align are not technical in nature. Primarily they revolve around territorial issues, management capability, management resistance, attitudes, and/or cultural conflicts such as:
1. The things we need to do are too hard, take too long, don't know how, too risky, not my job, don't have authority
2. We don't need to do anything because we are aligned (our data show that 90% are not and 10% are only partially)
3. Don't want or fear of a report card
4. The IT and business managers have relationship issues (personality or cultural) and can't/won't work as a team
5. Territorial -- Fear that sharing information will result in loss of power, influence, etc.
6. Business managers do not believe IT can execute even if funding is adequate
7. Business and IT managers want a one-shot, silver-bullet, forever fix (Not going to happen)
In the past, unfortunately, IT and business had an adversarial rather rather than a team relationship. The fault in the past was on both sides. IT professionals harbored a deep (but unspoken) set of beliefs that they "knew best" because for several decades only they could use and understand the computer. Business managers resented their dependency.
The state of technology is now such that everyone has a "working" knowledge of computers and systems. Therefore, business managers want to take back control -- but, they can never be IT specialists enough to avoid disasters.
Alignment requires both IT and business to work together as seamlessly as marketing and sales, finance and operations, etc. IT cannot and should not operate in a vacuum -- business cannot and should not design IT projects. Teaming together, IT can bring the best solution to the business manager's projects to maximize efficiency, effectiveness, and success.
In short, in today's world there is no room for these problems. If they exist, they need to be identified and rectified. If the problems are cultural or personality conflicts -- bring them into the open and bridge or resolve them. If the problems are managerial, territorial, or attitudinal -- resolve or replace people. If doing the work to get aligned is too hard etc, get help to do it or get over it.
What are your thoughts, experience, stories.....
Failure reason #3: Managerial, cultural and attitudinal roadblocks.
While both business and IT prefer the view that all IT issues can be resolved with a technical solution, the truth is unfortunately very different. Most of reasons for failure of IT and business to align are not technical in nature. Primarily they revolve around territorial issues, management capability, management resistance, attitudes, and/or cultural conflicts such as:
1. The things we need to do are too hard, take too long, don't know how, too risky, not my job, don't have authority
2. We don't need to do anything because we are aligned (our data show that 90% are not and 10% are only partially)
3. Don't want or fear of a report card
4. The IT and business managers have relationship issues (personality or cultural) and can't/won't work as a team
5. Territorial -- Fear that sharing information will result in loss of power, influence, etc.
6. Business managers do not believe IT can execute even if funding is adequate
7. Business and IT managers want a one-shot, silver-bullet, forever fix (Not going to happen)
In the past, unfortunately, IT and business had an adversarial rather rather than a team relationship. The fault in the past was on both sides. IT professionals harbored a deep (but unspoken) set of beliefs that they "knew best" because for several decades only they could use and understand the computer. Business managers resented their dependency.
The state of technology is now such that everyone has a "working" knowledge of computers and systems. Therefore, business managers want to take back control -- but, they can never be IT specialists enough to avoid disasters.
Alignment requires both IT and business to work together as seamlessly as marketing and sales, finance and operations, etc. IT cannot and should not operate in a vacuum -- business cannot and should not design IT projects. Teaming together, IT can bring the best solution to the business manager's projects to maximize efficiency, effectiveness, and success.
In short, in today's world there is no room for these problems. If they exist, they need to be identified and rectified. If the problems are cultural or personality conflicts -- bring them into the open and bridge or resolve them. If the problems are managerial, territorial, or attitudinal -- resolve or replace people. If doing the work to get aligned is too hard etc, get help to do it or get over it.
What are your thoughts, experience, stories.....
Monday, July 30, 2007
What is IT Alignment
IT Alignment continues to be a hot topic as evidenced by at least one article on IT Alignment showing up in almost every issue of any IT magazine. In the lastest issue of CIO magazine an article entitled "The Fabric of the Company" led me to address the question, "What is IT Alignment". It seems every article I read has a different "take". In the article mentioned, the definition provided by the CEO of a leading textile company indicated he knew his IT was aligned with his business because, "I have data to make decisions."
Other definitions we encounter include:
"Business and IT are aligned because we only do projects requested by business." (Does business always ask for the right projects - our data says No!)
"We are aligned with new product development." (Is new product development the only need for the business as a whole - our data says focusing on one aspect of business leads to poorer overall alignment.)
"We are aligned because we have a request system which is subjected to a rigorous top management prioritization process." (Still depends on the right projects getting into the prioritization hopper and the luck of the power struggle in the prioritization process for IT $.)
"We aligned with the implementation of an ERP system." (How long ago was the implementation of the ERP and how dynamic is it to business changes - our data shows this long term solution does not address the fast dynamic business changes of todays world.)
The definitions vary but the one we have found best over the last 25 years is:
IT is aligned with business when IT projects leverage and remain in sync with business strategy and goals.
The test for this definition of IT alignment is:
IT's contribution or leveraging of business goals consistently impacts profitability, ROI, ROA, or some other objective business outcome measure.
What is your definition of IT Alignment?
Other definitions we encounter include:
"Business and IT are aligned because we only do projects requested by business." (Does business always ask for the right projects - our data says No!)
"We are aligned with new product development." (Is new product development the only need for the business as a whole - our data says focusing on one aspect of business leads to poorer overall alignment.)
"We are aligned because we have a request system which is subjected to a rigorous top management prioritization process." (Still depends on the right projects getting into the prioritization hopper and the luck of the power struggle in the prioritization process for IT $.)
"We aligned with the implementation of an ERP system." (How long ago was the implementation of the ERP and how dynamic is it to business changes - our data shows this long term solution does not address the fast dynamic business changes of todays world.)
The definitions vary but the one we have found best over the last 25 years is:
IT is aligned with business when IT projects leverage and remain in sync with business strategy and goals.
The test for this definition of IT alignment is:
IT's contribution or leveraging of business goals consistently impacts profitability, ROI, ROA, or some other objective business outcome measure.
What is your definition of IT Alignment?
Thursday, July 5, 2007
IT Alignment Dialog - Failure Factor #2
We will continue to post a list of factors that in our experience contribute to the failure to implement or maintain IT Alignment with business goals. To see all the factors listed to date, review previous posts.
IT Alignment Failure reason #2: Belief that IT is only a cost center and cannot make a difference in business outcomes (profit, market share, ROE, ROA, mission accomplishment).
I admit that this one baffles me and I sense it baffles some of those posting comments to this blog. But, in the almost 25 years of working in this domain I am forced to recognize its reality. I hark back to a presentation made at one of the top IT research organizations where CIO's from most of the largest organizations were in attendance. When presented with evidence that IT can make a significant impact on profitability they expressly refused to believe it. A direct quote from one of the top CIO's in the nation was: "How can we make such a big difference in profit margin when we cost only 1-2% of revenue." I was stunned. How could an expert in any field desire to deny that they have an impact on outcomes? How could any top manager fail to understand that leverage on revenue, profit, and profit margin can or is in many cases disproportionate to its cost - that is in fact the basis of profitability (Revenue minus Expense)?
Even managers in businesses we have worked with that have become aligned, can fall prey to "cost center" thinking. The CEO of one company we worked with that enjoyed tremendous success in aligning IT with business goals which resulted in improved profit margins asked the following question of his CIO: "When will we be able to cut IT spending while we keep the competitive advantage generated by IT?" "Never." responded the CIO. "Only by managing IT based on contribution which means funding the IT projects in support of the top prioritized business goals, can we keep our competitive advantage - we can't just set some artificial level of IT spending and expect to remain an industry leader." Both we and the CIO were mystified since the spending on IT had resulted in many times its cost in increased profit. But it illustrates that "cost center" thinking, even for those that have seen the results of managing IT based on contribution, is a tough mind set to break.
If CIO's (CEO's, CFO's etc) do not believe that aligning IT with business will make an impact on profitability or any other outcome measure, then where is the incentive to align.
IT Alignment Failure reason #2: Belief that IT is only a cost center and cannot make a difference in business outcomes (profit, market share, ROE, ROA, mission accomplishment).
I admit that this one baffles me and I sense it baffles some of those posting comments to this blog. But, in the almost 25 years of working in this domain I am forced to recognize its reality. I hark back to a presentation made at one of the top IT research organizations where CIO's from most of the largest organizations were in attendance. When presented with evidence that IT can make a significant impact on profitability they expressly refused to believe it. A direct quote from one of the top CIO's in the nation was: "How can we make such a big difference in profit margin when we cost only 1-2% of revenue." I was stunned. How could an expert in any field desire to deny that they have an impact on outcomes? How could any top manager fail to understand that leverage on revenue, profit, and profit margin can or is in many cases disproportionate to its cost - that is in fact the basis of profitability (Revenue minus Expense)?
Even managers in businesses we have worked with that have become aligned, can fall prey to "cost center" thinking. The CEO of one company we worked with that enjoyed tremendous success in aligning IT with business goals which resulted in improved profit margins asked the following question of his CIO: "When will we be able to cut IT spending while we keep the competitive advantage generated by IT?" "Never." responded the CIO. "Only by managing IT based on contribution which means funding the IT projects in support of the top prioritized business goals, can we keep our competitive advantage - we can't just set some artificial level of IT spending and expect to remain an industry leader." Both we and the CIO were mystified since the spending on IT had resulted in many times its cost in increased profit. But it illustrates that "cost center" thinking, even for those that have seen the results of managing IT based on contribution, is a tough mind set to break.
If CIO's (CEO's, CFO's etc) do not believe that aligning IT with business will make an impact on profitability or any other outcome measure, then where is the incentive to align.
Saturday, June 30, 2007
Tuesday, June 12, 2007
IT Alignment - A Dialog
In the almost 25 years we have been working on IT alignment with business, we have uncovered some truths that lead to the consistent failure of IT to successfully align with business. I say failure, because algnment has remained a top goal of both business and IT senior managers for decades and yet the number of organizations that have achieved and maintained alignment is very small. (See CIO Insight, March 2007, "The Eternal Priority" by Allan Alter - "Yet again, alignment is the top priority for CIO's". "Alignment rises to the top because it's at the heart of business technology".)
These discusions are intended to explore the reasons behind the difficulty in implementing IT alignment. We will share our knowledge and experience garnered over these last decades and invite comments and input from those who have succeeded (yes, there are some), those who are/were unable to maintain, those who are in the process, and those who have lessons to share.
In an effort to get this dialog started I submit the following observation from among out top 10 failure factors:
SUCCESSFUL IT ALIGNMENT IS NOT ACHIEVED BASED ON WHAT YOU SPEND. It is not how much you spend, but what you choose to spend it on.
In all our years of research and work with alignment in hundreds of organizations, we have found only two that did not spend enough on IT to meet their goals. However, we have found only a handful of organizations that focus their IT investment dollars on the things that would make the business more successful -- enable their business goal achievement.
Organizations have spent huge efforts trying to determine if they are spending the right amount on IT. The answer is simple: If you are spending enough dollars to support the IT projects that will enable the top business goals of each function within the organization and on the IT infrastructure to enable its 3 to 5-year strategic vision, you are spending the correct amount of dollars. If you cannot afford to fund the IT support for all the top goals of each business function, the prioritization process is again very simple -- fund the projects that achieve the highest priority business goals.
We gather data on the three top goals of the managers in each unit of the organization. We have found that most organizations are financially unable to fund IT for more than the top two priority goals for each business function. In some cases, not all the 2nd level priority business projects can be fully IT funded. However, all top priority goals projects should be funded. The process is a give and take, but IT funding decisions made based on the impact on the business strategic plan.
The process is also a dynamic rather than static process. We have discovered over the years that by the time the ink is dry on a strategic plan, business goals have changed. The changes may be due to market, industry, economic, political, legal, or any number of other reasons. However, what is important is that the IT and business teams at all levels constantly revisit these goal shifts and determine whether the business projects underway should be continued, changed in priority, or abandoned. IT needs to be agile and able to reassign resources based on, at least, a quarterly review to minimize IT lag with business goals.
This brings up the issue of long-term IT projects such as ERP, etc. Should business and IT undertake these projects? Absolutely!!! However, funding these long-term projects should NOT preclude the funding of those IT projects required for successful short-term goal achievement. To do so is to risk organizational decline and, in the case of the private sector, diminished profitability. Those organizations that have focused IT funding solely on long-term projects have experienced (in addition to lower profits), job losses, market share declines, outsourcing of IT, and many other unpleasant outcomes. Big, long-term projects (like ERP) require infusions of additional IT resources in order to service the ongoing business.
So: How does the CIO maintain alignment currency on actual business goals and retain enough spending freedom to do the quick, high-payoff projects?
We invite anecdotes, stories, comments, observations, critique, expansion, or any other dialog on the above and look forward to a lively discussion and/or debate on this topic.
These discusions are intended to explore the reasons behind the difficulty in implementing IT alignment. We will share our knowledge and experience garnered over these last decades and invite comments and input from those who have succeeded (yes, there are some), those who are/were unable to maintain, those who are in the process, and those who have lessons to share.
In an effort to get this dialog started I submit the following observation from among out top 10 failure factors:
SUCCESSFUL IT ALIGNMENT IS NOT ACHIEVED BASED ON WHAT YOU SPEND. It is not how much you spend, but what you choose to spend it on.
In all our years of research and work with alignment in hundreds of organizations, we have found only two that did not spend enough on IT to meet their goals. However, we have found only a handful of organizations that focus their IT investment dollars on the things that would make the business more successful -- enable their business goal achievement.
Organizations have spent huge efforts trying to determine if they are spending the right amount on IT. The answer is simple: If you are spending enough dollars to support the IT projects that will enable the top business goals of each function within the organization and on the IT infrastructure to enable its 3 to 5-year strategic vision, you are spending the correct amount of dollars. If you cannot afford to fund the IT support for all the top goals of each business function, the prioritization process is again very simple -- fund the projects that achieve the highest priority business goals.
We gather data on the three top goals of the managers in each unit of the organization. We have found that most organizations are financially unable to fund IT for more than the top two priority goals for each business function. In some cases, not all the 2nd level priority business projects can be fully IT funded. However, all top priority goals projects should be funded. The process is a give and take, but IT funding decisions made based on the impact on the business strategic plan.
The process is also a dynamic rather than static process. We have discovered over the years that by the time the ink is dry on a strategic plan, business goals have changed. The changes may be due to market, industry, economic, political, legal, or any number of other reasons. However, what is important is that the IT and business teams at all levels constantly revisit these goal shifts and determine whether the business projects underway should be continued, changed in priority, or abandoned. IT needs to be agile and able to reassign resources based on, at least, a quarterly review to minimize IT lag with business goals.
This brings up the issue of long-term IT projects such as ERP, etc. Should business and IT undertake these projects? Absolutely!!! However, funding these long-term projects should NOT preclude the funding of those IT projects required for successful short-term goal achievement. To do so is to risk organizational decline and, in the case of the private sector, diminished profitability. Those organizations that have focused IT funding solely on long-term projects have experienced (in addition to lower profits), job losses, market share declines, outsourcing of IT, and many other unpleasant outcomes. Big, long-term projects (like ERP) require infusions of additional IT resources in order to service the ongoing business.
So: How does the CIO maintain alignment currency on actual business goals and retain enough spending freedom to do the quick, high-payoff projects?
We invite anecdotes, stories, comments, observations, critique, expansion, or any other dialog on the above and look forward to a lively discussion and/or debate on this topic.
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