DETROIT – The need to reduce cost and increase business performance, while at the same time evolving systems to fit global markets, ensures that IT is not longer the sideshow that it used to be. Nonetheless, one consequence of moving technology’s act into the center ring is that every Chief Information Officer is now accountable for getting maximum return out of each corporate IT dollar.
It goes without saying that, if the money spent on IT does not directly support the purposes of the business, than there is the potential for waste in deployment and inefficiency in the achievement of business goals. As such, in order to have the greatest business value all technological processes and practices ought to be specifically traceable to a purpose of the organization. That general condition is termed, ?Alignment.?
In practice, an ideal state of alignment is reached when every IT process and function serves to directly satisfy an identifiable aspect of the organization?s business functioning. However, it is not possible to align technology to function without following a conscious process.
Therefore, the ability to ensure a persistent state of alignment depends on the creation of a fully integrated organization-wide governance mechanism that is capable of evaluating and maintaining the proper relationship between IT systems, processes and people and the overall vision, mission, philosophy and values of the larger organization.
Since the CIO is responsible for the technology side of alignment, they have to be involved in the evolution and oversight of the overall alignment process. One of the implications of this requirement is that the new skill set of all future CIOs will have to include strategic thinking and enterprise-wide process development capabilities.
A much longer article, to be published in Cutter Magazine, describes the precise set of skills and capabilities that will be required and suggests some paths that might be followed to produce a CIO who can guarantee maximum strategic alignment. The aim of this article is to help the reader understand what the elements of alignment are and why it is such an important issue for the future of IT operations everywhere.
Enhancing IT Performance: Competitive Advantage through Communication
It has been well understood for some time that there is a direct relationship between IT performance and competitive advantage. As far back as 2001 Chief Executive Officers worldwide identified the ability for the technology to directly support business strategies as the top priority for IT investment (CIO, 2000). This would merely be an interesting observation, if it were not for the fact that the same study had cited alignment as a top three priority for the prior DECADE.
Moreover, the same study also revealed that organizations in general suffer from delusions about the state of their present alignment. Over 59 percent of companies surveyed thought that their business and IT functions were properly aligned, whereas, in fact, upon formal assessment only 6 percent actually were. Much of that faulty awareness was due to a lack of communication between the business and IT side.
Communication, not surprisingly, turns out to be a critical element of ensuring optimum alignment. Because they have to live with the consequences of poor understanding, the desire for enhanced communication between business and IT executives was almost twice as important on the IT side as it was with the business. Twenty one percent of the IT executives surveyed believed that the greatest barrier to effective alignment was a lack of knowledge about how IT operates among business executives, whereas only fourteen percent of business executives felt that knowing what IT does was a critical issue.
Instead sixteen percent of business executives felt that lack of alignment was directly attributable to poor prioritization on the part of IT management, which probably explains why twelve percent of the IT executives surveyed felt that there was a lack of support for the IT function within the business as a whole. The fact that the business executives ranked support fifth tends to reinforce the age-old stereotype that business folks do not want to have anything to do with the actual deployment and use of their corporation?s technology.
The consequence of that perception is that the organization is unlikely to demonstrate a distinctive competency or to sustain a competitive advantage. This might manifest itself in such things as minor skirmishes between IT and the various business owners. However, it is also likely to result in overall corporate resource inefficiency, high levels of conflict in the day-to-day performance of tasks and low levels of customer satisfaction. That is why a conscious alignment effort is so important.
According to experts, such as Henderson and Venkatraman, alignment starts with the creation of an enterprise-wide architecture, which integrates the domains of business and information technology into a single seamless management framework. Three strategic considerations are then evaluated to ensure proper alignment; Scope, Distinctive Competencies and Environment. Scope ensures that the organization has a precise understanding of its purposes.
Distinctive competencies represent a form of risk assessment, where the firm identifies its distinguishing strengths in order to asses the extent to which can compete in any given arena. The final factor, environment, is outward looking. It evaluates the impact of external influences on the competitive posture of the business. If these three factors are lined up correctly than the organization is assumed to have achieved an optimum competitive posture.
Maintaining Alignment: What kind of person does it take?
The practical problem with maintaining alignment is that the technology that is needed to ensure a good competitive position is constantly changing. And, because the underlying technology is ubiquitous within the business process, continuous change also imposes commensurate change on the organization and its people. Being the champion for mass organizational change demands strategic and human relations capabilities that do not fall within the typical skill set of most technically focused CIOs. Which begs the question, what kind of preparation does make sense if alignment is an important issue?
The answer revolves around the fundamental capabilities that are needed to ensure continuous and correct scope, competency and environmental positioning. On the surface the business strategy and process management elements of that requirement suggest that an MBA might be the best possible career path. However CIOs have never been a traditional part of the top-level policy team and so a strictly business preparation does not seem to fit the realities of the actual function.
The way most businesses are organized the CIO is not responsible for strategic positioning like the Chief Executive Office (CEO), Chief Financial Officer (CFO) and the Chief Operating Office (COO). Instead they are likely to report to one of those top level positions in a technical advisory capacity. Nor does the CIO have contact with the company?s board of directors, or customers, unless there is a disaster that requires a scapegoat.
Instead, the CIO operates within their technical kingdom, more-or-less divorced from the strategic policy making role. Moreover, the conventional technical responsibilities of the CIO argue that a strictly business preparation will not fit the requirements of the role. While an MBA would help the CIO deal with the strategic planning and organizational development elements it would not give them the necessary in-depth understanding of technology. Nor would it prepare them to structure and maintain the essential monitoring and assurance processes to control such uniquely abstract and con
