Mar

19

How to Tap IT’s Hidden Potential

Filed Under Alignment | 1 Comment

An interesting article in the MIT Sloan Management Review discussing IT business alignment entitled "How to Tap IT’s Hidden Potential" By Amit Basu and Chip Jarnagin caught my attention. In the article the authors talk about the traps or obstacles that trip up companies as they struggle with understanding how to use technology strategically within their businesses.

The five primary reasons that IT and business don’t often see eye-to-eye as mentioned in the article include:

  1. Mind-set differences between management staff and IT staff: "….Interaction between logic-driven IT personnel and managers who deal mostly in gray areas can be exasperating for both sides. Too often the result is a minimization of such interactions, leaving the IT team feeling misunderstood, unappreciated and isolated. … Unfortunately, the chief information officer often reinforces this separation. That’s because he or she usually is an IT professional chosen to be a director of technology, rather than an executive who is expected to fully integrate IT into the company."
  2. Language differences: "…IT people use jargon and acronyms that are indecipherable to others. Executives speak the language of business, fully expecting to be understood by everyone in the company. Much is lost in translation, leading to suboptimal results that IT is blamed for, which causes resentment and cynicism toward management…"
  3. Social influences: "…. the persistent perception of those who are oriented toward science and technology as ‘nerds.’ The recent boom in IT outsourcing has Sworsened this estrangement. Now, IT professionals are almost pitied as dinosaurs whose jobs will soon be sent offshore. "
  4. Flaws in IT governance (defined as the specification and control of IT decision rights): "….IT decisions are often made by the wrong people with insufficient input, and the resulting failures drive a wedge between senior managers and their IT colleagues. There is some irony here in the fact that outsourcing often appears to improve IT management, in part because a governance committee is needed to manage the relationship with the outside providers. If a similar committee had previously been in place, outsourcing could probably have been avoided in many cases. "
  5. Difficulty of managing rapidly changing technology: "…applying IT to business needs, especially when a company is innovating, is still an experimental process with few standards. Technology changes rapidly and is subject to fads, which can be confusing even to IT professionals."

 

Seven Steps to Building a Strong Bridge between It and the Business

The authors recommend that organisations seeking to create a compelling advantage through the smart and effective use of IT in their business follow the following seven steps.

  1. Begin with IT literacy—and commitment—at the top. The impetus for effective IT management must come from the CEO and the board. There has to be a willingness on the part of the CEO and the other executives to know enough about IT to understand its functions and its value to the company, in the same way that they understand accounting, finance and marketing.
  2. Hire an IT leader who sees the big picture. The next step is to hire a true chief information officer—not just a technical expert, but a leader who understands the strategic importance and use of IT. Choosing a CIO is much more difficult than choosing other top executives. There are very few people with the perspective and the skills to effectively deploy and leverage IT within a business. The best CIO can work within the management culture at the executive level, can present IT issues as business issues to the executive team, and is willing to learn the business as well as technology. Rarely is the CFO the greatest financial expert in a company, or the CMO the greatest marketing expert. Similarly, some of the most effective CIOs at large companies have not been top technologists….. Rotate management and executive candidates through IT. A stint in IT must be part of the training for people being groomed as general managers and senior executives.
  3. Create demand for IT solutions. Managers at all levels across the organization need to be convinced that innovations in IT-related areas such as knowledge management, business intelligence, information security, change management and process integration are essential to the success of the enterprise. Knowledge of them should be as mandatory as functional knowledge in marketing, finance and manufacturing. Only then will the use of IT to address these concerns move from a "technology push" driven by the IT group to a "demand pull" from people across the organization, which will ensure that the company’s IT services are strategically aligned with its business and that capital won’t be allocated for expensive and unnecessary IT services.
  4. Make sure nothing gets lost in translation. A company must have people at all levels who can translate IT language for those outside that department and translate the language of management for those in IT. Some of the greatest mistakes in the use of IT occurred in the late 1990s when CEOs bought into IT initiatives and IT-based business models blindly without bothering to truly understand what the technology could and couldn’t do. At the same time, IT staff should have a clear understanding of the business role and value of their work. This should include awareness of the costs and benefits of systems, applications and operations, and an understanding of the interdependencies of IT and other resources within the organization. Including IT personnel in business planning and control committees, task forces and cross-functional teams, as suggested above, and similarly, having non-IT managers on IT planning committees, can facilitate this.
  5. Rationalize IT spending. The planning of IT expenses and investments should be subject to the same rigorous procedures and methods as any other expenditure. Too often, executives sign off on IT spending without a clear understanding of its business value. To ensure that all IT spending makes sense for the business, the executive management of the firm must institute proper IT governance—that is, ensure that every part of the organization that is affected by IT decisions is part of the decision-making process, and that decisions are made at the highest levels with a full understanding of all their implications.
  6. Create an IT portfolio by evaluating risks and returns. Just as an investor balances risk and returns in constructing a portfolio of investments, management should analyze the costs, benefits and risks of all IT projects to determine how to get the most benefit from the dollars invested in technology. There is a myth that IT investments can’t be evaluated because many of the advantages are intangible or can’t be monetized. While such uncertainty often is part of the equation, thoughtful analysis of the costs and benefits of IT projects can still lead to greater confidence in the value of these projects.

I think that the author make an excellent point. Much of the IT failures I’ve seen and been a part of have results, not from bad technology, but rather from the poor management of technology. As much as IT is responsible for the effective management of technology for the business, the business function also need to take responsibility for holding IT accountable for the value they deliver, just as any other business function.

 

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