Business and Technology Alignment

Posted by TomRose on November 12, 2006 under EA | 3 Comments to Read

The elusive Business/IT alignment everyone wants and knows they need to achieve. One approach is placing IT in a completely separate organization (as it usually is), trying to run IT as an external company to the business, the business is your customer. I think this has value and does drive cost down as it optimizes the IT organization. However, what it can’t accomplish very well is drive revenue. Although most companies are focused on just getting IT to optimize operations to minimize cost that is really only part of what IT should be trying to accomplish.

Alignment, how to achieve it, well, I’m not sure it can be achieved with IT organizations as they are typically structured. I typically see the CEO, CIO, CTO line of management, then IT spread out underneath. Also some companies distribute IT and make them part of the line of business, however, that approach typically throws out most of the enterprise direction needed for IT optimization.

The solution, just like my previous post about technical and non-technical aspects of Enterprise Architecture, a company has to do both. Start with combining some of the CIO roles with the COO, then a CTO (seasoned technical leader) reports to the COO. Shared goals across business operations and IT are coming from a lower level than the CEO, and have a better chance for technology and business units to work towards the same shared objectives. Then ensure there is technology subject matter experts focused on key business areas that report into their assigned business unit, as well as enterprise IT.

As business and IT start to collaborate, IT will not only be optimizing cost through enterprise focus, but most importantly joining the business in directly driving revenues. Don’t be fooled, this is not a rant or some grandiose vision, it is happening. Start listening to the corporate investor calls, there are companies that are doing it. Regardless of the numbers, you will hear a confident CEO, COO/CIO all able to articulate business strategy, the technology that is going to make it happen, and how it’s happening today. As analyst beat them up over the spend, they will take a staunch stance to the strategy. Not that they will ride a bad strategy into the ground, but more importantly can stand the pressure to continue to duke it out with competitors with the current operating model, instead of jumping the curve to the next level. When a company is moving from OK, good, to great, this is the indicator the move is underway.

I see companies starting to make this move, so we will see how this plays out over the next couple of years.


Tom

  • Michael Schaffner said,

    Another useful way to look at this is to structure IT around its 2 main support functions.

    The first is the “run the business” function. These are the folks in application development and operations that do all the day-to-day functions needed by the business to continue to operate. This role is tactical in nature and the focus is on helping the company achieve monthly, quarterly, annual business goals.

    The second is to “grow or change the business”. These are the business analysis folks that work closely with the business units (BU) to help them achieve the strategic vision. By working closely I mean participating in the BU teams meetings etc. to the point it almost it appears that they work for the BU rather than for IT. This is a more strategic role and is focused towards the “vision” rather than the next period plan objectives and goals.

    IT has always done the first function but the second function is just now becoming more common. It is this second, strategic function that I think you are starting to hear about in the investor calls and in the annual reports.

    The challenge for CIO’s is how to develop this new second function while maintaining the first. Very often the BU and even more often the IT group are not used to seeing IT in this mode and struggle with how to utilize IT for this.

  • Tom Rose said,

    Michael,

    Thanks for taking the time to comment. Yes the strategic role and direction does put IT in a new and challenging role. Perhaps we can name the new mode IT 2.0 :o )

    I agree generally BUs and IT really do not know how to effectively function in a strategic mode together. I think the answer will only be found as both come to the table and actually start communicating with each other. Listening a little more instead of talking at each other….much easier said of course, and perhaps a little cliche, but required.

  • Tom Rose said,

    Some additional blog posts on similar topic:

    Enterprise Architecture Reporting Lines

    Changes in the Role of the Enterprise CTO

    Tom

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