Business Executive Series #8

Business Imperative, New Investments
Representative goal statement – “I need IT to merge 5 acquired companies into one, requiring all new, state-of-the-art IT systems across the board.”

This particular representative goal statement really gives me pause for thought.

The statement contains a goal, “to merge 5 acquired companies into one,” the way to achieve the goal, “all new, state-of-the-art IT systems,” and the group responsible for achieving the goal, “IT.”

Let’s look at the situation.

We have five acquired companies. Check.

We want them to be one company. Check.

The way to do that is for IT to merge them together by implementing “all-new state-of-the-art IT systems across the board.”  Pause.

While I’m perfectly willing to agree that IT will do lots of the heavy lifting on this program of work (as in any Merger, Acquisition, Divestiture, and Integration activity), there is nothing that can make me believe that they are solely responsible for the actual merging of the entities from virtually any standpoint – especially business process. Furthermore, I find it very difficult to believe that the best IT solution to merge the companies would be to implement a completely new, leading edge set of systems (that item actually maxed out my risk meter).

Perhaps I’m just cranky today, but this whole thing makes me wonder if IT was involved at all in whatever process was used that led to these conclusions.  I’m going to presume that the answer was “yes” and take this opportunity to discuss the roles of IT organizations and how this goal statement could occur with each type.

I’ll begin by reviewing how the different roles were classified. The url in the Library for reference is:

IT Roles

There are two dimensions in the classification, creating a 2×2 matrix: IT Capability and Business Value of IT. IT Capability is defined as the breadth of competencies in the IT organization (note that this is not IT performance, which is assumed to be adequate for any competency). Business Value of IT is defined as the extent to which information technology itself (not the IT group) can add competitive advantage to the business.

In this model, there are four roles that the IT organization can play: Utility, Advocate, Order Taker and Business Partner. Please note that this discussion is not intended to be critical of any particular role, but simply to explain the role and its dynamics.

Where both IT Capability and Business Value of IT are low, the role that the IT organization plays is that of a Utility. The business recognizes the low potential for information technology to add competitive advantage and the IT organization provides the limited set of capabilities needed to “keep the lights on” for the business.

If this was the role of the IT organization, IT probably had little meaningful participation in the MADI discussions. It couldn’t because it lacked the capability to do so. The story that I would make up to support the way that the business executive came to his conclusion is that a strategy consulting firm played a large and influential role in the MADI process. The solution leads to heavy dependence on external resources to implement. I doubt that this was the scenario that led to the goal statement.

Where IT Capability is high and Business Value of IT is low, the role that the IT organization plays is that of an Advocate. The business recognizes the low potential for information technology to add competitive advantage, however for whatever reason, the IT organization provides far more capabilities than needed by the business and continues to advocate “spend more on IT” as the answer needed for virtually any business solution. There is a mismatch here and this type of organization tends to be short-lived unless they are future-focused and can make an R&D-based case to justify their cost.

If this was the role of the IT organization, IT probably had significant participation in the MADI discussion. IT could because it had the capability to do so and would be looking for the opportunity to expand its role. The story that I would make up to support the way that the business executive came to his conclusion is that the IT organization showed IT as the savior in the situation. The solution leads to IT overly influencing the solutions space at a critical time. Again, I doubt that this was the scenario that led to the goal statement.

Where IT Capability is low and Business Value of IT is high, the role that the IT organization plays is that of an Order Taker. The business recognizes the high potential for information technology to add competitive advantage and the IT organization provides less capabilities than needed.  In this situation, the business is pushing IT forward and usually is in the position of suggesting (or demanding) a particular capability. In this situation, IT is in a reactive role, positioned to be constantly asking the business ”What do you need?”

If this was the role of the IT organization, IT probably had limited participation in the MADI discussion. IT would  participate because it was asked to do so. The story that I would make up to support the way that the business executive came to his conclusion is that the IT organization “showed up” and took the order as usual. This solution leads to IT over committing and setting itself up for failure – and a critical one at that. I believe that this was the scenario that led to the goal statement.

Where both IT Capability and Business Value of IT are high, the role that the IT organization plays is that of a Business Partner. The business recognizes the high potential for information technology to add competitive advantage and the IT organization provides a broad set of capabilities. IT is recognized as a thought partner and is fully engaged in business discussions, with the business desiring IT to help in the “Let’s think about that” process of value discovery.

If this was the role of the IT organization, IT probably had very significant participation in the MADI discussion. IT could because it had the capability to do so and was part of the process since its inception. The story that I would make up to support the way that the business executive came to his conclusion is that the IT organization was fully engaged in the discussion, offered options and trade-offs for solutions in terms of time, cost and risk, and came to a joint conclusion with the business that this was the best way to accomplish the business objective. Because of that, his solution leads to the right outcome, however, I question if IT would be given responsibility for the merger as a part of that process. Given that, I doubt that this was the scenario that led to the goal statement.

The bottom line for this particular goal statement is that an inappropriate conclusion was reached because of the mismatch between the role played by the IT organization and the current needs of the business. Both the business and IT will suffer as a result.

Savvy business executives are cognizant of the different roles played by IT and ensure that that the role of their IT group is consistent with their business need (and that their CIO is on the same page).