Friday, January 25, 2013

Is IT a Growth Engine or Supporting Function

IT leadership needs to shift their management orientation and begin thinking like entrepreneurs.

IT perception is always controversial, on one hand, IT touches every nerve of organization at digital era, makes significant impact on business growth; on the other hand, most of IT organizations today are still under-appreciated, being treated as supporting, back office function, why, and how should IT refine its purpose and re-brand its reputation?


1.    Why is IT still being treated as a supporting function?

  • IT Leadership: Most of the CIOs today don’t seem to be future thinkers and business strategists. CIOs are always in supporting roles and they don't have the same level of power and control to DIRECTLY influence executive decision-making. Many CIOs consider IT organization as a separate entity that "support" other business units and do not consider themselves as an integral part of the company so they keep asking for empowerment and influence. In fact, they should have much more influence and power in an organization than they know as they provide technology backbone to the entire business. 
  • Business structure or organizational culture make it so: This is also largely shaped by how other CxOs see IT in addition to the background of the CIO. What does the business want from IT and how is IT positioned to deliver it? There are living examples in organizations where innovation from IT was not embraced by the business, relegating IT to a largely operational support role. If leadership teams do not collaborate as a whole, but act as the sum of pieces, unhealthily compete with each other internally about budgeting, resources, credit, and blames, then, the CIO as "influential" role may turn to be second class, as they are not as "powerful" as CEOs, or as "rich" as CFOs, etc. Especially now, more business functions start purchasing cloud base IT services, will it leave CIOs more "powerless"? On the other side, centralization of the IT budget (as opposed to oversight of the corporate IT spend) puts pressure on CIOs to chase cost reduction programs. That stifles innovation, leads to underinvestment in maintaining assets, diverts key skills from value creation to isolated cost reduction and results in an ineffective ITSM framework. 
  • Lower level of IT maturity: Besides culture, many IT organizations still stick to reactive mode, to keep the light on, put little emphasis on driving business change or innovation, if this is the case, IT leadership, process, strategy need be well aligned in order to improve IT performance, and move up to the next level of IT. Also, depending on the business model, some businesses only see IT as a necessary means to an end and not a game changer.

2. How should CIOs Run IT as Business Catalyst and Growth Engine?

  • How to promote IT as a competitive advantage? CIOs should understand the business first, otherwise, it is challenging to link the dot between business and IT. Once you show and demonstrate to the other CxOs that you understand the business they will respect you and give you Authority, Power, and Influence in executive decision-making. What a CIO should do is understand how he/she creates positive / negative value. Exemplify how IT directly impacts productivity. A CIO can be a major catalyst to generate real value. The main aspect is HOW to create real value. CIOs need to do a better job of articulating the existing and potential value of IT to the business, quantitatively, a language and measurement senior executives understand. The methods and mechanisms for doing so are found in the field of IT Governance and include disciplines like financial, demand and service portfolio management, all of which are aimed at better strategic alignment, through transparency into and continual improvement of the economic and strategic value of IT assets.
  • CIOs should be transformational leaders instead of transactional managers: CIOs have to be able to navigate the business objectives and corporate strategy, and lead the creation and execution of the corresponding technical strategy for the company. During strategic decision-making, executives take into consideration of anyone that can provide real value. Senior executives are interested in profitability, maintaining and increasing market share. CIOs have to bring to the table real value; most CIOs do not understand the value concept. So it is an advantage if the CIO has diversified experience, for business domain or technical expertise to identify IT visions and gaps between IT service and business operation, ultimately eliminate the gaps. CIOs need to be able to recognize the struggles of the company by understanding the business beyond IT. Empowerment and influence come with trust first. The CIO must be a transformational leader that not only manages the IT group but also, CIOs must work to integrate and lead the integration (not merely alignment) of IT to business processes and the strategic value proposition, also, IT must partner with human change management experts to manage change. In the end, it is not about technology, but what technology can do when it is enabling and integrating with change management and business processes to deliver strategic differentiation.
  • IT leadership needs to shift their management orientation and begin thinking like entrepreneurs: Some IT leaders have no interest in this transition. IT entrepreneurialism becomes a new fixture for management in their efforts to substantiate their competitive position, effect market landscape, and drive new revenue growth. Profits and then ROIs should be the driving force behind any IT project. The IT department provides guidance, support, assistance and direction in the application and adoption of information technology solutions in support of business objectives! Today IT is the wing of every successful business. Set right KPIs to measure the level IT contribution. Take Operating expenses (normally where IT costs are collected) if IT part cost remains constant in terms of value compared to gross; IT is then contributing to productivity increase. 
  • Establish a Customer-centric Culture: As such, the CIO should envision a systematic approach to identifying business operation requirements for IT services by engaging executives' decision-making processes, understanding the business and linking the dot between IT and business operation. The IT output meeting the business operation requirements will change the cost center perception to business growth engine, and understand both internal customers as well and end customers, and the level of client satisfaction will naturally increase the CIO's power and influence. But his/her concern isn't about power or control - it's about the capability to define, create, deliver and then CLAIM value against critical business results. IT needs to do a better job of quantifying the value of the services they provide, measurements that go beyond KPIs that focus on the warranty of the service, important as they are in the overall measurement of the value of a service. That includes contributions to the top and bottom line. IF you have the strategic perspective and skills needed to have THAT conversation, you can be influential 
In summary, CIOs have to have a clear and big picture of company core business and goals. Through organizational structure, business processes, Procedural framework and IT technology support for all of these areas, CIOs have to recognize pros and cons and propose concrete activities for improvement. CxOs will accept the CIO as an ally only if he/she is performing proactive contribution to acquiring goals. CIOs have to be supported by their employees and to establish relations with the owners. It's very important how, to whom and when to propose ideas for business transformation, and IT needs to become business catalyst, rather than just supporting function.











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