Business Executive Series #7

IT Value Proposition, Strategic Focus
Representative goal statement -  “I want IT to have superior service/cost positioning on a long-term basis and focus critical domain knowledge and expertise on high value initiatives.”

I would love to work with the CEO  who made that statement. In one simple sentence, s/he captured the essence of the CIO mission.

What this Business Executive is saying that IT should always be delivering services that optimize their value proposition and putting the right people on the most important business initiatives.

The representative goal statement implicitly recognizes the different IT roles (ref. Library – IT Roles Matrix) and explicitly requests that IT become a partner to the business by focusing the right resources on critical business opportunities.

Honestly, I’m not sure where to go with this one. The answer is as broad as I can imagine. I’d have to write a book to cover it. On the other hand, the subtitle of this site is “The Business of IT, Simplified” so I wouldn’t be delivering against that promise if I couldn’t post something on it.

Perhaps this is the time to talk about the right people and how to get them in the right place to be focused on the high value business initiatives. I’ll address “Right People” and “Right Place” separately.

Right People
Critical domain knowledge comes in two flavors – business and technology. One side knows more about the “what” of the business or business process, the other knows more about the “how”. The union of their knowledge is where the value is highest to business initiatives.

The “what” skill set  is found in the Business Value Discovery Function (ref. Library – IT Functions & Definitions). Organizationally, this is usually found in a dedicated “Business Relationship Management” group or  as part of an “Application Development” group.

The “how” skill set is found in the Infrastructure Management and Information Management Functions, respectively (ref. Library – IT Functions & Definitions). Organizationally, this can be found almost anywhere – and usually is. Likely groups are “Application Development,” “Operations,” “Engineering,” or “Architecture.”

Whichever skill set we are discussing, finding the Right People is easy. In the former, they are the IT people that the business folks always want to be on their important projects. In the latter, they are the people that the business-facing IT folks want to be on their important projects. They are the same names that keep coming up for stretch role assignments in talent management discussions. You are aware of them and know how immensely valuable they are to both the company and to IT.

Now that we know who these people are and what their skill set is, let’s discuss the Right Place for them to be.

Right Place
In BES #6, I discussed the Business Value Discovery function and making it an independent group, so that if could be an area of focus and specialization. I suggest the same here as the right organizational home for the “what” skill set.

In keeping with my advocacy of a service-based strategy for IT, here is an illustrative list of services that this group (let’s call it Business Relationship Management) may provide to their business customers:

•    Business System Analysis
•    Rapid Cycle Prototyping
•    Business Rules and Modeling
•    Business Process Mapping
•    Solution Delivery Management
•    MIS
•    Program Support
•    Quality Management (IT)
•    Financial Management (IT)
•    Portfolio Management (IT)

It will take some initial work with HR to create new job descriptions with roles and responsibilities, levels and career path/progression for this group. There will also be some necessary process changes for Solutions Delivery, plus a good bit of Organizational Change Management work. It will pay off quickly as this group becomes a partner in business thought and provides valuable insight to IT as to where the business is heading – and perhaps help shape that.

The second place that your Right People need to be is in Enterprise Architecture, specifically on the Solutions Architecture/Business Process dimension. I structure  my Enterprise Architecture groups with two dimensions, Technology Architecture (Application, Data, Infrastructure, Security) and Solutions Architecture (Business Processes/Domains).

The Technology Architects are accountable for developing the “to-be” state for their respective technology areas. The Solutions Architects are accountable for developing the “to be” state for their respective business process domains and making certain that each project that is delivered brings IT one step closer to the realization of the future state.

The development of these future states is a collaborative effort, as is the development of Business Technology Roadmaps, supported by – you guessed it – the Business Relationship Management groups.

Once again, if this role does not currently exist in the Architecture organization, it will take some work with HR to create new job descriptions with roles and responsibilities, levels and career path/progression for this role. There again will be some necessary process changes for Solutions Delivery and the Enterprise Architecture process, plus Organizational Change Management work. This will be particularly vital, as you will be pulling some of the most knowledgeable folks from their current groups.

The payoff will be in the positioning of these valuable resources in a high-leverage position where they create the technology plan for a business domain and influence project delivery for it. They interact with the Business Relationship Management team so that the plan is grounded in the business strategy and with the Technology Architects so that it is consistent with the technology strategies.

For consistency, here is an illustrative list of services that this group (Enterprise Architecture) may provide:

•    Technology Planning and Roadmaps
•    Technology Research
•    Business Solutions Development
•    Business Process/Domain Roadmaps

They are also accountable for EA Governance and EA Processes.

Now that you have the right people in the right places, the chances are greatly in your favor that IT will be able to “focus critical domain knowledge and expertise on high value initiatives.”

Business Executive Series #6

Business Imperative
Representative goal statement -  “I thought that (what) we needed IT to do started off as (IT) cost savings, but that quickly changed to support for competitive business requirements.”

The way in which the Representative Goal Statement was put leads me to believe that the business executive who authored it had made some initial assumptions about the IT value proposition. These assumptions were changed as IT began the engagement process with the business to reduce costs.

In my experience, there are a few conditions than can cause an initial mistaken assumption about IT costs being the main focus from the business:

•    IT costs are allocated back to the business units.
•    IT has few or no business-friendly performance indicators.
•    IT business engagement (the Business Value Discovery function) is underdeveloped.

I’ll focus this post on those conditions and what needs to be done about them for IT to be better aligned with the business.

IT costs are allocated back to the business units
This is a good thing – certainly better than IT being “free” to the business. It was likely the primary reason for the business executive thinking that the most valuable role that IT could play was to cut its own costs.

No doubt that the most consistent feedback that s/he received from the business unit leaders was that IT costs too much. After all, if it was a significant and largely uncontrollable part of their P&L, then it stands to reason that whatever IT cost – it was probably too much. Therefore, to make IT successful in the eyes of the business units, it needed to be focused on cost reduction efforts.

This dynamic ties back to my first post (BES-1) where the actions taken to fix the situation need to include better transparency and reporting mechanisms for IT costs.
This unmet need was beneficial, as it was the cause of business dissatisfaction that led to uncovering a broader value proposition for IT services.

IT has few or no business-friendly performance indicators
All businesses have some sort of performance metrics. IT performance metrics usually begin as availability-based measures for specific technologies (e.g. “servers” “network” “mainframe”). Unfortunately, these don’t mean much to a business executive trying to manage a budget.

Absent performance metrics that are meaningful to the business from IT, the only metric for them becomes cost, which as we saw earlier is a very narrow discussion.

Development of a Balanced Scorecard for IT performance is important to connecting with the business. Although I’ve discussed scorecards in other posts, these were purpose-built for uses other than reporting overall IT performance. The important common theme with those other scorecards is fitness for use.

I’ve been a part of several multi-million dollar consulting engagements at various companies to develop IT Balanced Scorecards (probably averaging $1.7M). None of these projects resulted in a product that was completely satisfactory to IT or the business.

These experiences have taught me to be cautious about consultants that force-fit the company into their performance framework (Balanced Scorecard + Key Performance Indicators), which is almost always based on the original Kaplan & Norton model and some standard KPI categories.

My suggestion is to work with an internal team to develop a practical scorecard based on your business. The most successful balanced scorecard effort that I’ve been a part of was initiated as a part of implementing an IT Managed Services Strategy. The end scorecard measured four areas:

•    IT Service Delivery (metrics for service delivery failures and service level agreement performance)
•    IT Solution Delivery (metrics for responsiveness and delivery of new solutions)
•    IT People (metrics for IT staff satisfaction)
•    IT Financials (metrics for IT budget performance)

Each category had KPI’s that were built by IT and the business (for Service & Solution Delivery) or were extended from standard enterprise metrics (for People & Financials). It was simple, objective, understandable, and able to be implemented. It also cost far less (staff time vs. out-of-pocket) compared to the consulting engagements and had the added benefit of total buy-in from both the business units and IT.

A Balanced Scorecard implementation doesn’t have to be expensive, complex, or part of a larger program of work, like the Managed Services Strategy. It simply has to be aligned with your customers, services, and corporate measures (where applicable).

On Day 1, all the measures won’t be there (some automation/instrumentation will need to be put into place), but IT will have engaged with the business on meaningful level and be able to checkpoint progress against the full implementation plan.

IT business engagement (Business Value Discovery function) is underdeveloped
It’s arguable that this specific “Aha” moment for the business executive would never have occurred if this IT function were fully capable and engaging the business units at an appropriate level. Because this was not happening, the business units could only engage at the most superficial discussion level of IT performance – cost.

Of all the IT functions, this one is arguably the most strategic to both the business and IT – and the one that is generally least invested in terms of both budget and organizational mind share (Architecture runs a close second). In most companies, it is still a part of the Application Development or Solution Delivery group and needs to be split off so that it can be focused upon and developed as an IT competency.

Why is this important?

The definition of the function that you find in the Library “IT Functions & Definitions” points directly to the strategic nature of the function. It is the part of IT that is specifically accountable for partnering with the business to find where IT can create competitive advantage. Because of where it sits in relation to the business, this function is largely responsible for enabling the CIO to be successful in optimizing the value of IT to the business. IT has no hope of being accepted as a business partner if this function is unsuccessful.

So now you know that the function is not performing in a satisfactory manner. What can be done about it in the short-term? Short of an interim stop-gap measure, presenting an improvement plan may be the limit of what can be done in less than a few months.

Normalizing the group and the AD or SD groups is not a trivial program of work. It needs strong HR support and a supporting Organizational Change Management program to be successful. In terms of what will need to happen, there are elements of Process and Organization that need attention.

From a Process standpoint, the role of the new organization in Portfolio Management (Solutions Delivery investments), Solutions Delivery, Enterprise Architecture, and Service Delivery will need to be defined.

Organizationally, each dimension will need to be addressed to stand up the new group:

•    Structure: Definition of a separate “Business Engagement” group (which requires the existing AD or SD group to be adjusted).
•    Skills: Development of new job descriptions (levels, comp, career path) that articulate the new roles and responsibilities.
•    Staffing: The plan that says who is going where and when (what transition and training look like)
•    Sourcing: Where you are going to find all these talented folks (strongly suggest that these are sourced internally, with a hiring plan developed to close the gaps)

In an organization of any size, this will be several months of work, perhaps longer.

Given the shift as stated earlier in the Representative Goal Statement, the success of the IT organization will now be judged on its ability to support “competitive business requirements”. The first step in doing that is being able to engage with the business to determine what those requirements are and manage the ideation, portfolio and delivery processes going forward.