Wednesday, October 19, 2016

"CIO Master" Book Tuning #124: Five Stages of IT Organizations

The industrial-based enterprise of the 20th century had run out of gas, and the digital enterprise of the 21st century has the new characteristics and DNA of innovation.

Due to the exponential growth of information, changing nature of technology, and continuous disruptions of digitalization nowadays, CIOs seem to be always at hot seat, and the saying about the demise of the internal IT has been around for years. In reality, the majority of IT organizations get stuck in the lower level of maturity, slow to change. Take a critical look at IT, on which the following stage is your IT organization? CIOs need, to be honest with yourself about assessing the strengths and weaknesses of IT organization. Then you should validate your observations by seeking input from your customers, with the goal of how to reinvent IT and improve its effectiveness, agility, and maturity?

Order Taker: The majority of IT organizations still run in a static industrial mode -”built to last," not “designed to change.” All too often, IT acts like an order taker, overloaded and understaffed, many businesses still view IT exclusively as a cost center. If the business doesn’t view IT as being on the same level, they won’t properly communicate or align with the IT department. More often, this comes down to the business feeling that IT can't keep up with their demand for new services, in other words, that IT isn't as agile, flexible and innovative as it needs to be. Most of the CIOs today don’t seem to be 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. In fact, they should have much more influence and power in an organization than what they know as they provide technology backbone to the entire business. 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. If your IT organization is still perceived as an order taker only by businesses and customers, it means IT gets stuck on the lower level of maturity, running in a reactive mode, operation driven as a support center.

Service Provider: Many IT organizations also run as a commodity IT service provider, they don’t challenge the best practices which were perhaps not so best due to the increasing speed of changes, or keep “we always do things like that” mentality. They are risk-averse and don't want to take on initiatives that will create more work or issues for them, with “don't fix it until it breaks” mode. Nowadays with emergent on-demand service and IT consumerization trend, if IT can’t provide differentiated solutions, businesses will bypass IT and order those commoditized services from outside vendor easily. Therefore, in order to keep internal IT organization competitive and differentiated, an effective CIO’s job is to improve operations to reduce the burden on the company while trying to stay current with ever-changing technologies. That includes reducing costs, improving systems, streamlining processes, managing risks, and providing continually expanding niche services for the business.

Business solutionary: IT continues to grow in importance to organizations, both operationally and as a competitive advantage, IT needs to clearly define its role as a value creator and business solutionary. IT leaders should consider themselves business professionals with in-depth T-shaped knowledge in the IT area. CIOs need to spend the time to understand the business issues enough to push back on what they asked for and explain how alternatives can provide more value. This is extremely difficult to do without spending significant time learning the business. Whatever business you are in, take the time to really learn that business or you will always just be the IT guy or gal, and never be part of the top leadership team making strategic level decisions. The business wants fit-for-purpose IT solutions that enable them to be efficient in delivering services and products to end customers at the right cost and to make profits to the shareholders. IT should focus on delivering high quality, reusable, consistent solutions to fit for the businesses needs in a cost-effective manner over the long term. The fit-for-purpose means the right foundation of functional building blocks, with all the common non-functional 'abilities' (availability, reliability, scalability, reconfigurability, interoperability, elasticity, security, etc) at an acceptable cost.

Strategic partner: IT has a very strong impact on the flow of the operation because the information is the lifeblood of businesses nowadays, it is not being singled out, it is being concurrent with senior management.  IT organization has to move from a reactive order taker and back-office support function to a strategic partner and business catalyst. In order to be a strategic business partner, the CIO must have a "seat at the table" and a voice to holistically advise on strategic business discussions and decisions, transform IT into rule co-maker. It means having IT and business collaborate as equal partners so that strategies, organizations, people, processes, projects, etc, work in harmony, such that initiatives, especially those focused on leveraging IT to increase revenues are successful. The more important thing is to work on the activities and considerations that need to be addressed to enhance IT-business relationship and help organizations become agiler and proactively adapt to the changes, moving up from efficiency, effectiveness to agility and innovativeness; from functioning to firmness to delight. This collaboration entails effective communication, value analytics, partnership, technology scope, people skills, and governance discipline. All these need to be effective to have mature alignment and proactive participation, and that organizations with higher and stronger maturity outperform organizations with lower maturity.

Innovation Game Changer: IT can become known as an innovation engine by helping the business develop innovative next products/services or delighting customers, and become the revenue rainmaker by associating its efforts directly with sources of income. You are able to spot the opportunities to increase revenues. Looking for solutions which will directly benefit the external end customer will improve the competitive advantage and in-turn bring in increased revenue. CIOs need to become business leaders to work within IT and across the business scope and seek ways to grow revenues, profitability and spur innovation. That's a completely different mindset than managing technology only. Leadership towards true value creation for any organization will come from the willingness of its leaders to knock down the barriers separating insulated IT teams and the revenue generating business ownership teams. Unless IT understands the needs of its internal and external customers, it will be unable and possibly unwilling to develop the system and process differentiation that leads to the kind of competitive advantage, that will propel the organization's growth and profitability.

The industrial-based enterprise of the 20th century had run out of gas, and the digital enterprise of the 21st century has the new characteristics and DNA of innovation. It’s important for IT leaders to create a comprehensive list of the IT organization’s strengths, weaknesses, goals, and Digital IT is a paradigm shift in role, responsibility, and attitude. Your goals and objectives will be your drivers. Your strengths and weaknesses will be your constraints, strengthen your strength, and improve your weakness, in order to move up the maturity level of IT from reactive to proactive mode, from a service provider to a business solutionary, from an order take to the strategic partner of the business, and from a cost center to an innovative rain-maker.


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