Sunday, November 11, 2018

CIO as "Chief Investment Officer": Running Digital IT with Pragmatic Advancement

 Running Digital IT with pragmatic advancement is all about enforcing communication, enhancing collaboration, bridging gaps, developing differentiated business competencies, and measuring IT performance wisely.

With the increasing pace of changes and emerging on-demand IT service models, many IT organizations are at the crossroad to either transform themselves as strategic business partners or gradually turn to be irrelevant. When IT becomes only the mechanism for realizing a vision described by other C-level executives, it becomes a commodity. An effective CIO is a true business partner! Leading CIOs must be able to convey the technological vision, run a high-performance digital IT organization with pragmatic advancement and drive changes proactively.

Gain the multiple perspectives on Return on Investment: Return on Investment - ROI is a ratio, a percentage of the dollar amount your company gains from IT investment effort over what it initially spent in simple terms, it’s the company’s payback. Running digital IT with pragmatic advancement means having higher ROI, not only through finance lens; ROIs in the digital context is expanding into other less measurable, but not less tangible areas that IT managers need to be focusing on, such as employee satisfaction, creativity, teamwork, collaboration, making silos disappear, etc. In reality, many IT organizations are not even trying to address measuring their value to the business as they simply have not employed the methods to measure IT objectively, holistically and from outside-in business and customer lenses. Cost, schedule, and quality are the normal things that businesses see and judge themselves against. But to take the step further, understanding the satisfaction of customers, users and stakeholders are what allows the measurement of multidimensional values IT can bring up to the business. The IT Return On Investment value proposition should be an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of the customer, users, and stakeholders. The golden thread of IT is about linking the business strategy to IT investment objectives and business benefits, as well as help an organization assess if the business change with associated technology is the right thing to be doing in the first place. Do not confuse the means with the end. If the correct goals and objectives are set by the correct people, if measurements are then taken and analyzed, and the opportunity is provided to the CIO and the stakeholders to explain the variances, and then, the effective IT investment decisions can be made, running digital IT with pragmatic advancement and high ROI can be achieved.

Analyze total cost, total value, and total impact: Total Cost Ownership is another IT finance & performance measurement worth digging through. Often times, C-level executives are oriented on hard costs vs, soft costs upon technology investment, but soft dollar costs cannot be ignored to get a true TCO for any technology or service. The proper TCO measurement is dependent on knowing all of the associated costs for an asset or service. In IT, this includes hardware cost, software licenses, personnel, “hard” or physical asset, etc. Many components within IT are indeed commodities, but IT itself is a mature and complete business function that must be measured utilizing the same financial disciplines as all other business functions. Alignment of tech expense or TCO by business process, channel, product, etc, provides a more accurate view of the value of IT. Each one of these elements carries its own costs, which in turn must be partially or fully allocated to the asset or service IT provides. Put simply, TCO should be a reflection of the complete IT business function. It’s important to analyze total cost, total value, and total impact in order to run digital IT with pragmatic advancement. In an IT management meeting, instead of spending all time on total IT expense discussion, the focus point should shift to what line of business provides the greatest return; which should be invested in for the future. Total IT impact and total value should get more attention rather than just cost. Do cost/benefits analytics is important to improve IT management maturity. IT should prove that the combination of quality and price for any given service feature is comparable to the marketplace. Use hard numbers if you can, measure the right things, and measure them right. IT management needs to properly understand all elements of value that are translated to the organization, and how all the pieces and parts of the organization are ultimately impacted, for good or bad, by each new business initiative, in order to run digital IT with pragmatic advancement.

Justify a performance premium: To run digital IT as the strategic partner, it’s important to practice strategic thinking - keeping the end in mind for managing IT performance. When people speak about an IT initiative generating new revenue, visibility of costs measured against the visibility of quantifiable benefits is a way to show how IT contributes to the top and bottom line, to justify a performance premium. It provides a pathway into technology optimization and justification of IT value contribution to the organization's bottom line performance within each revenue stream. IT leaders must keep in mind which KPIs best measure IT capability to deliver performance and which ones better measure differentiated competency and the potential for breakthrough innovation. Ensure IT raises the bar on a continual basis to ensure the stakeholders getting a real picture of how well IT management, such as business optimization efforts, innovation management are bearing desired results. CIOs need to understand different measurements, play the number game wisely, and help business leaders decide whether or not a tech investment is worth making. To justify a performance premium, IT measurement and performance have to evolve from being a cost center to becoming a revenue generator and strategic business partner.

IT has to keep consolidating, integrating, modernizing, innovating, and optimizing to improve its management clarity and organizational maturity. Running Digital IT with pragmatic advancement is all about enforcing communication, enhancing collaboration, bridging gaps, developing differentiated business competencies, and measuring IT performance wisely. It’s critical to build a trustful business relationship, make tangible measurement and analysis, and exemplify how IT can directly impact productivity, drive change, catalyze innovation, and lead digitalization.


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