The new rules of IT-business alignment in the digital era
Getting in sync with your organization’s goals has never been more important, or more challenging. Here’s how to align IT and business strategy for digital success.
April 23, 2018
By Minda Zetlin
Dell and VMware CIO Bask Iyer has a complaint. He wants IT industry experts, speakers at IT conferences, and publications like this one to stop telling CIOs that if they don’t move with the times they are likely to lose their jobs. “Every meeting, every year, they say CIOs who don’t do something are going to get fired,” he says. “That narrative has to change.”
Instead, he thinks experts and executives should recognize that CIOs may have the most difficult role in the C-suite. “None of the executive jobs change as fast,” he says. “The rate of change of technology is exponential, and the increase in companies’ dependence on technology is growing exponentially as well. And humans can’t understand exponential increases.”
Many of those ignore-this-and-you-might-get-fired warnings have centered on IT-business alignment. IT leaders who focus too much on technology and not enough on their businesses’ specific needs risk making themselves irrelevant, experts cautioned. That’s still true.
But in today’s world of everything-as-a-service, with technology increasingly moving outside IT’s direct control and most organizations striving for digital transformation, aligning IT strategy with business strategy looks very different than it did a few years ago. And success in this essential area is governed by a whole new rulebook. Here’s how to make IT-business alignment work in today’s world.
Rule No. 1: Balancing maintenance and innovation is crucial — and more difficult than ever
According to a Gartner report released in late 2016, only 23 percent of CIOs are seen as a trusted business ally by their CEOs. Dan Zimmerman, CIO of B2B payments company MSTS, thinks he knows why. “They’re spending too much of their time keeping the lights on and not understanding the needs of the customers or how the business needs to evolve,” he says.
But many IT leaders face a seemingly impossible choice. If they focus their attention on keeping the lights on, IT risks being seen as a cost center rather than business driver. IT professionals may be perceived as a high-tech version of plumbers whose job is the digital equivalent of making sure water comes out when users turn on the tap. On the other hand, the lights do need to stay on. Think of Maslow’s hierarchy of needs, Iyer says. “If your email doesn’t work, the IT guy shouldn’t come talk to you about strategy.”
Is there a way out of this dilemma? Begin by figuring out when good enough is good enough, Iyer advises. In other words, the pursuit of “five nines” of uptime may not be the best use of your or your employees’ time. Whatever you do, don’t spend much time reporting to the C-suite on how good your uptime was. “When the trains are running on time, don’t talk about how the trains are running on time because everyone expects that,” Iyer says. Focus on maintenance, and business leaders will start thinking that you’re doing a good job as far as it goes, “but we need something different,” he says.
“Something different” is the innovation and digital transformation many enterprises now believe they need to avoid being overtaken by disruptors. “Boards are putting a lot of pressure on the C-suite to think digitally, so more and more we’re seeing digital transformation on the CEO’s agenda,” says Woody Driggs, Americas Advisory Digital leader at EY (Ernst & Young). “The first thing CIOs have to decide is, are they going to play the traditional IT role of being the maintainer of ERP and the big platform, or will they be the digital enabler? They’ll play a very different role in each case.”
Although he is Dell and VMware’s chief digital officer as well as its CIO, Iyer says separating the roles can make sense in some situations. “I used to think that if you have a chief digital officer, it means you don’t have the right CIO,” he says. But maintaining a large complex system is a difficult job in itself. Some CIOs who are good at that job serve themselves and their companies best by focusing their attention there and leaving innovation to someone else, he now believes. For CIOs and IT departments who do take on the role of digital enabler, “You’re innovating constantly and doing art-of-the-possible sessions constantly,” Driggs says. “A lot of organizations made the mistake of implementing technology for the sake of technology and then saying, ‘What can we do with it?’ That’s unaffordable today because there are so many new technologies. IT’s role has to be to bring the business together and answer questions such as, ‘Could we use AI to do a better sales forecast than you do with your sales management process?’”
Rule No. 2: IT may no longer control all technology, but it’s still responsible for making sure nothing goes wrong
For years, experts have predicted that line of business departments would one day spend as much on technology as IT does. That day is fast approaching. In May 2017, IDC reported that line of business technology spending was growing twice as fast as IT technology spending, and that the two would reach parity in 2020.
“Budgets are shifting and budgets are everything. Whoever’s got the budget has final say,” observes Matthew Mead, CTO of digital technology consulting firm SPR. Mead has observed this transition in his own work. “Traditionally, if you were selling a business system, you’d sit down with IT representatives and one business person and have a very technical conversation. Nowadays, it’s shifted completely. A lot of times we’ll find ourselves in a meeting where the business has much more representation in terms of numbers of people and IT has much less. I think IT has become more of an influencer and consultant. It used to rule the roost and make the call. Now there are many voices and IT is just one of them.”
That makes vendors’ jobs easier in ways that ought to worry every CIO. “When we sold to IT, the information we went over was so much more detailed and rigorous. There were a lot of details that had to be disclosed. Now when we work with a business, the experience is a much larger focus and some details that used to be important are no longer important,” Mead says, adding that some of those no-longer-discussed details might include security and maintenance requirements.
Even leaving the obvious risks aside, there are many good reasons why business units should not make technology purchases without serious IT involvement. “If we’re truly going to digitally transform, we need to recognize that many critical business systems are interconnected or are dependent on other systems,” Iyer says. “Not only can IT help you integrate these applications better, we can advise on how to get more value from them. For instance, rather than having multiple disparate data instances across numerous applications, IT could build a data lake that marketing, sales and finance all tap into for their business needs. Without strategic conversations like these, your business unit could suffer.”
Meanwhile, IT no longer has meaningful veto power over technologies it judges insecure, insufficiently robust, or unable to integrate with existing systems. IT leaders can try saying no, but there’s a good chance line of business employees will simply sign up for the inexpensive or free software- as-a-service tools they want anyway. So IT leaders must operate by persuasion rather than fiat, and for that they must be seen as collaborators instead of gatekeepers.
“What’s been successful for me is making sure I build relationships within departments and making sure I understand what they’re trying to accomplish,” says Charles Grau, CIO of IT services provider UDT. “That means understanding their pain points and making sure I’m partnering with them to ensure the selection they make is the best selection for them.” He says his attitude is this: “I’ve got your back. You figure out what you think are the best applications and then let’s look at them together.”
The key, he says, is sharing as much information possible, because the more people understand all the aspects of a technology decision and its effects beyond their own area, the likelier they are to make the right choices. “It’s not the old adage of throwing someone under the bus. It’s not: ‘It was your decision — you’ll have to live with the consequences.’ We all have fiduciary responsibility. If someone fails, we all fail,” he says.
Rule No. 3: IT must commit to the success of every department — and of the organization as a whole
This might sound like a no-brainer. It might also seem like something you’re already doing. Many IT leaders would say they’re committed to their “customers’” success — and by customers they mean the internal departments and lines of business that use IT products and services, sometimes paying for those services via an internal chargeback system. But today’s successful IT leaders have gone beyond this model.
For one thing, they make sure to spend time with their company’s external customers. Some report that they spend 25 percent of their time meeting with external customers, or that they have such meetings several times every month. “Internal customers are the ones we see every day, but if you stop there, you lose visibility into the challenges they’re facing,” says Craig Williams, vice president and CIO at Ciena, which provides networking equipment and software to the telecommunications industry. “If you talk to salespeople but never go on a sales call, you won’t see the challenges from their perspective.”
Many tech leaders these days are also skeptical about chargeback systems. “IT budget models have evolved in an attempt to capture the true cost of running the business,” says Brad Bell, CIO at network security company Infoblox.
“Often those costs get allocated back into the business as part of the run portion for a function. This can create friction resulting in ‘shadow IT’ under the premise that things can be done better, cheaper, faster than if held in a central IT function. This is rarely the case and usually results in short-term satisfaction and long-term unintended negative business impacts.”
“A lot of companies talk about chargebacks,” Williams says. “I think it’s important to have showbacks.” For example, he says, “I can show back what the true cost of expanding facilities is in IT. You can do showbacks to show the cost of laptops, which is really a measure of how much hiring we’re doing. Most influencers in the business units don’t understand what IT cost is, but they can if IT shows them.”
Williams believes that the key to success is to understand the specific goals of a given organization, which vary depending on circumstances. Before joining Ciena, he held tech leadership positions at Cisco, Red Hat and LinkedIn. “I’ve spent time in each of these roles talking to leadership from the CEO on down to find out what they’re concerned about, and sometimes it’s not the product we make. We had hyper growth at LinkedIn and I didn’t have to worry about the product; it was, How do you scale a company? At Ciena, we don’t have that hyper growth, but the question is, How do you get great talent?” Once you know your company’s objectives, don’t expect them to stay the same, he adds. “It literally changes quarter over quarter, depending on the challenges.”
Be ready to take the initiative, he advises. “A lot of IT departments are like fast-food drive-thrus,” he says. “‘What do you want? Let me get that for you. Here’s what the cost is.’ That’s where a lot of people are stuck. You have to go to the influencers themselves and ask, ‘Hey, did you ever think about this?’”
IT leaders who want to be digital enablers “have to have an entrepreneurial mindset,” Grau adds. “I’m constantly reading and looking at what different organizations do. Who are the top organizations delivering customer service? And it doesn’t need to be in my industry, it could be online retailers. What makes them different? You see those bits and pieces and you see how you can incorporate them into your organization, and that’s what makes you a differentiator. You have to constantly reinvent yourself. You always have to have that fire in your belly.”
