November 28, 2011
It’s the perennial issue for many CIOs and often the No. 1 challenge for new CIOs: “How do I align IT with the business?” And while this is perhaps the most important challenge for IT groups struggling with a bad reputation across the business, it’s certainly not the most important challenge for IT groups with a solid track record of success. For these teams, the challenge is how to move beyond alignment.
In the report Beyond Alignment: BT Strategic Planning, I highlight how critical it is for IT to help formulate business strategy. The research suggests that how a firm develops and manages business strategy is pivotal to the question of how IT can move beyond alignment. Unfortunately, there are a number of challenges with this:
- Goals cascade into hierarchies. If the goal is the “what” and strategy is the “how,” it makes sense that if you define how you are going to achieve the goal you have a strategy, right? Wrong. Unfortunately, many goals are so high level that in defining the how, we are simply defining a sub-goal or objective. Let’s say our high-level goal is to drive additional revenue. We might define the strategy (how) as entering China as a new market. But in reality, we still don’t know how we are going to achieve this goal, so this is a level-one objective. Suppose we now ask how we will enter China — and we decide we will form a China-based subsidiary — this then appears to be the strategy for the objective. But once again, we can ask “how” to get to a low-level strategy that details how we will establish the subsidiary. The cascading nature of goals and strategies causes a great deal of confusion because the underlying technology to support each strategy can be vastly different.
- We too often mistake goals for strategies. The cascading nature of goals means business executives will often set strategy by defining lower-level objectives and not by actually setting a strategy. Even though you could argue that the goal (what) is to grow revenue and the strategy (how) is to enter new markets in China, this still represents an objective because it isn’t clearly defined. To get to the strategy, we must understand how we will reach the goal; the objective is an interim step on the path to the goal. For IT to help, we must understand the level at which the real strategy decisions are made within the organization and help develop business technology strategy at this level.
- Goals are often too vague. A good goal is SMART: specific, measurable, achievable, relevant, and time-bound. Grow revenue by 20% by the end of 2013 by entering China might be a SMART goal (assuming it’s achievable and relevant to the business). Too often, goals are vague and more like aspirations. Without specifics, it is impossible to know if strategy A or strategy B is optimum. Suppose strategy A takes 12 months to implement and yields a return on investment (ROI) of 20% and strategy B takes six months to implement and has an ROI of 18%. Further financial analysis might reveal that one strategy choice is favored over the other, but if the goal must be achieved within 12 months, strategy A may be a nonstarter. So having specifics such as when the goal is to be attained and how it will be measured are crucial.
- We want to jump to the solution before considering alternatives. Sometimes a business unit leadership team will come up with a series of “strategies” that read like a project list for IT. “Our strategy is to increase sales by automating our direct-mail response and sending out 20% more offers through direct mail.” Here, the business unit has made a decision about the optimum way to increase revenue by applying a technology solution. As strategies go, it may be fine. The question we must ask is this: Is this the optimum strategy for this business unit or would other, less risky/expensive/complex strategies deliver an equivalent or even better return? Business units and IT frequently want to jump to the solution before considering their strategy options and weighing the technology cost, risk, complexity, and time-to-business-impact of each alternative against the returns.
To overcome these and other challenges, CIOs and IT strategists must step up their game around strategic planning. Business technology (BT) strategy development is arguably the most important activity within IT, having the biggest impact on business results, yet some CIOs delegate developing “IT strategy” to one or two individuals as if it’s a chore — or they set up an annual strategy planning process tied to setting the IT budget. Successful BT strategy planning requires support from an ongoing process and involves senior IT staff in business-unit leadership team meetings throughout the year. The reality is that, for most organizations, strategies continuously fluctuate with the ebb and flow of markets. Leaders adjust — and they need their business technology strategy to adjust to the realities of business, at the speed of business.
But that’s just my current analysis . . . our research is ongoing and I invite you to take part in our current research survey on strategic planning. I’d also love to hear your thoughts and comments here or on our discussion board? Does IT have a role in developing business technology strategy? Are the goals of your organization clear enough?
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