Barnaby would like to thank Robert S. Gold of Palladium Group for his thought leadership, which forms the basis for the ideas expressed in this column.
For most companies today, IT has become so embedded in the external value proposition that it is nearly impossible to execute strategy without it. Yet, if you ask business managers to talk about the relationship with their IT organization (and vice versa), you will often discover that there are significant levels of anxiety and dissatisfaction on both sides. Business managers will often say that IT is "weak," "struggling to simply keep systems up and running," and "not adding enough business value." Meanwhile, most of the IT managers assert that they are delivering high-quality, reliable systems at a competitive cost but are unable to do strategic things (such as analytics to support customer interactions or launch new, revenue-generating products and services) because they are constrained by scarce resources, often allocated in an environment of political trade-offs as business units compete for IT spend.
In the past decade, the competitive landscape has changed, and one can now see many, especially newer firms (such as Amazon.com and Netflix) placing IT at the center of their value proposition. They use IT to be more agile than the competition and deliver innovative services to customers. Yet, in some cases they have overlooked the traditional disciplines of managing costs and quality. The lesson is one of balance; IT organizations need to manage the fundamentals (cost and quality) while delivering on the competitive differentiators (agility and innovation).
Figure 1: Evolutionary Stages of IT Organizations
Some traditional IT organizations are adding an emphasis on agility and innovation to create more value for the firm. Some newer IT organizations (e.g., those oriented toward agility and innovation) can realize significant benefit by incorporating cost and quality objectives into their management agendas. Still, most IT organizations today have recognized by necessity the importance (at least implicitly) of managing all four of these value drivers. Therefore, it becomes a question of how well they manage cost, quality, agility and innovation. In his pioneering work with hundreds of IT organizations, Robert Gold (a global practice and recognized thought leader for IT strategic management) has developed an IT organization maturity model that describes how these trade-offs are managed along a continuum from defensive and reactive to responsive and finally, strategy focused.
Figure 2: Sample Strategy Map
The starting point in building a better partnership between IT and the business involves understanding where you are on the matrix in Figure 1. To move toward the strategy-focused stage, IT must first demonstrate its competency in cost control and quality - disciplines that enable it to move to areas of strategic value, or contribution. Gold's lexicon of competency and contribution forms the basis of the IT organization's financial strategy and value proposition to its internal customers (the business units) and forces the organization to focus on objectives in several key categories:
- Operational excellence: Standardize platforms and architectures, realize scale economies, manage service quality;
- Business unit alliance: Understand business unit strategies, effectively support end users, improve business and productivity, and deliver according to schedule; and
- Solutions leadership: Understand emerging technology applications, propose and implement enabling solutions.
Finally, according to Gold, an IT organization cannot succeed without the right people and skills and a focus on career development. Furthermore, it must have a culture of innovation and constantly acquire skills in new technologies.
An IT organization that aspires to being strategy focused should make these priorities explicit to engage in an ongoing dialog with the business about how all of the elements are both related and essential to enabling the success of the firm. Some IT organizations have used the vehicle of a strategy map (see Figure 2) to communicate a holistic and integrated view of its objectives and a balanced scorecard to identify appropriate metrics to track performance and prioritize investment proposals. These frameworks have also proven to be powerful support tools for IT leadership decision-making and reporting progress to stakeholders both within and outside of IT.
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