The implication that the past failures of IT to achieve business goals are because of poor alignment of the business is a skewed view that fails to account for parallel activities and sometimes-faulty decisions by the rest of the business. This skewed view also fails to take into account the significance of business influence on technology spending. For maximum strategic effectiveness, building the business should be viewed as a shared responsibility in which all elements of the enterprise view technology and technologists as integrated parts of the business. Executives both in and outside of IT should alter their perspectives to this more holistic view of the business to best achieve successes.
It is almost impossible today to pick up an IT trade magazine without seeing an article about the need for IT to align with the business. It has been popular of late to tag the CIO and other IT executives as technology-focused geeks who need to focus more on business issues, but do not have the skills to do so. However, there is little evidence that this is widely true anymore. Instead, what is surfacing is another picture — a new type of IT executive has emerged that is business focused and is trying to work with his or her counterparts, but in many companies this is a struggle. The primary reason is that executive management was making decisions based on gut feel, individual greed, as well as the desire to drive the bottom line each quarter regardless of the soundness of the decision. Perhaps ironically, perhaps tellingly, these senior management levels are typically devoid of the top IT executives.
The reaction to these developments, of course, is a retrenching into corporate governance. Public companies must now properly account for and accurately report their business activities. In the U.S., companies face criminal penalties and fines for non-compliance with specific governance legislation. It is interesting to consider how this newfound corporate accountability meshes with the stale assertions of IT's non-alignment with the business. Marriage counselors tell spouses they cannot change each other, only themselves. Likewise, it is up to the IT and business executive to focus on their respective roles in serving the business, while helping their peers make the changes necessary.
The prevailing view is that IT is a cost center for most enterprises, while CEOs, CFOs, and LOB executives are charged with making profits for the company. For that reason, IT has to align with those executives and their initiatives, not the other way around. This creates a situation in which IT is not in the driver's seat on key decisions and spending; however, IT provides a service and in general should let the LOBs make the spending decisions. IT then plays the important role of stewardship because it has or has access to the necessary skills and infrastructure common to most projects. For that reason, technology projects require management and resources independent of any particular LOB initiative.
A mutual effort is required to do project portfolio management and governance, so that IT is addressing the key business initiatives. IT executives, as well as CxOs and LOB executives, should work together on all fronts to ensure IT is part of the corporate governance plan. This can be accomplished by the CIO or other IT executives participating in corporate governance committees, and business units getting involved in IT governance activities.
Many executives have failed to deliver projects on time or within budget, or have budgets that continue to rise in a fashion that is viewed as "out of control" by the CEO, CFO, or others. These executives have had to demonstrate that they can deliver and understand that they are a part of the business. This need is a major driver for the "metrics madness" infesting many IT departments and executives today.
Robert Frances Group believes vendors will continue to sell to CEOs, CFOs, and LOB executives for as long as those vendors believe these individuals will sign for or approve purchases. Therefore, IT executives should inject themselves into these activities sooner rather than later, and get business executives to understand that they should only be establishing requirements and not selecting solutions. The latter effort should be left to IT after a project has been approved through a rigorous project portfolio management process. However, to have this succeed, IT executives need to become trusted advisors, and to become well respected by other corporate executives.
However, published reports based on recent surveys still show that approximately 80% of the non-IT executives do not trust CIOs, other IT executives, or their IT organizations. In part, this is because many IT executives have failed to deliver over the years in many different ways. These IT executives have thus lost the trust and partnering capabilities essential for dealing with their peers successfully and effectively. For IT executives to succeed going forward, this has to change. RFG believes IT executives should start delivering against meaningful metrics that align with the business — and those metrics should be developed with the business people who will be measuring them and not in a vacuum. Accountability must be demonstrated and trust earned, not just in IT, but also across entire organizations. While this is not true at every organization, it is generally true enough that it deserves intense focus, or certain business and IT executives and their initiatives will continue to fail.
There are two key prerequisites to successful, bi-directional IT-business alignment. The first is that the leadership environment must be conducive to good working relationships. Unfortunately, many companies fail to meet this critical criterion. It takes a certain type of leadership to create and maintain such an environment. Sadly, this leadership is lacking in far too many companies.
Second, proper alignment requires a capable IT executive leadership team. Again, it is unfortunate but true that many people who hold top IT executive positions are not suited for the job. They may come from other companies and lack sufficient business knowledge, or may come out of other departments and lack sufficient technological acumen.
When these two conditions are not met, the result is usually failure. This is reflected, in part, by the average tenure of a CIO being less than two years, according to published reports — just long enough to learn that things are not working out.
One issue that business executives should consider is optimism versus reality. Whether it is the CEO predicting a great year of innovation and competitive success or the glowing guidance provided to Wall Street analysts, optimism without the proper evidence behind it backfires on companies. This optimism often shows up in IT project planning as well, typically when LOB managers insist it is possible to complete certain projects within what IT considers unrealistic budget or schedule constraints. IT executives should not allow non-IT personnel to create unrealistic budgets or schedules, but instead should stick to their guns. By holding to the estimates with which one feels comfortable, and then agreeing to change budgets and schedules based upon the increase or decrease of funding or staffing, IT executives can enhance their stature and build trust. Conversely, folding and failing only diminishes one's esteem. It is up to IT to enlighten non-IT personnel on the processes and methods for project development and change management.
It is also important for business executives to better understand technology and the world of IT. Just as they would study the latest quality initiatives or accounting practices to apply to bettering their business, business executives should be familiar with the major trends in IT. LOB managers can learn about how peers in similar business units inside other companies integrate and use technology to succeed in business. They can also help bridge any gaps between business and IT by having ongoing interactions with IT people to exchange information and ideas. Those people who understand both the technology and business elements have the highest value to an enterprise. In the same vein, those that remain focused on their core competency risk becoming irrelevant as enterprises evolve. IT executives and their staffs should be the ones doing the demonstration and explanations of technologies as part of helping LOB people meet these objectives.
RFG believes the focus on IT-business alignment ought to shift to one of business alignment across the board. IT and business executives need to understand their business in greater detail than ever before to best steer it toward long-term success. No longer can executives afford to view technology as an adjunct to the enterprise as it is — it must be integrated into the whole. IT and other business executives should view the enterprise as a shared responsibility in which all elements of the enterprise view technology and technologists as integrated parts of the business and extensions of their organizations.
About the Author
Ronald Exler is Director of Research for Robert Frances Group.
Developing expertise in software application development, information technology asset management, geographic information systems (GIS), and a variety of other areas, Mr. Exler has spent the past thirteen years working in the vendor-related arena of systems management & technology management software.
Most recently, Mr. Exler was Vice President of Product Management for NetBalance, a vendor of technology asset management software. Mr. Exler oversaw and managed product life cycles; defined market strategies and tactics; and developed and managed partnerships with external vendors including Oracle, Hewlett Packard, and Microsoft.
The Robert Frances Group is an advisory service for Global 2000 and mid-market executives concerned with managing the business of information technology (IT). RFG provides clients with easily understandable strategic advice in Internet-time.