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.
Thursday, August 16, 2007
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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