Techs And Execs - Aligning Business

“ Information technology risks are becoming increasingly entangled in business risks, and it is the CEO’s responsibility to distinguish between them. The CEO can no longer afford to delegate these decisions to [IT] managers alone. At Wal-Mart and at many other companies, technology has become integrated with almost every aspect of the business.” Bob L. Martin President and CEO of Wal-Mart’s International Div. Former Wal-Mart CIO

Techs and Execs: Aligning Business and IT Craig F. Mathews, MBA Director of Strategic Technologies, McKim & Creed, P.A. CEO, Toolkits, Inc.

Question What would happen to your company if all your computer systems, backups and electronic data were destroyed all at once?

Question What would happen to your company if you had no strategy, no direction, and no vision for where you wanted to go in the future?

IT Today IT is no longer the bank of computers down the hall. It is the heart of the knowledge-based organization. It touches every facet of the company if managed well, and can create competitive advantage if led superbly.

What We Will Cover Business Strategy Creation IT Strategy Creation Aligning Business and IT Metrics for IT Management

What’s In It For Me? When you leave, you will understand: Why there is a disparity between IT and business leadership How to bridge the gap Factors for firm growth Models for decision-making that incorporate business and IT perspectives Metrics for IT management

The firm’s information technology capabilities are a top management responsibility….top management must question and understand the technology implications of the value proposition and then decide on capabilities and funding priorities. Weill and Broadbent, Leveraging the New Infrastructure

Three Factors for Firm Growth Plan People Profit Strategic intention, processes, goals, accountability, alignment Raw material, critical resource Profit=Revenues-Expenses You can only reduce expenses so far You can increase revenues infinitely

Three Factors - Scenarios Plan People Profit A good PLAN without the people or profits to execute it will fail Profit People Plan Good PEOPLE will fix the plan and grow the profits if supported Profit Plan People Good PROFIT without good planning or people is luck -and will pass

Three Factors - Conclusion Balance, of course, is the best approach Always err on the side of good people (A’s hire A’s, B’s hire C’s) Even if profit is low, train your people and focus on Knowledge Management (KM) - they will turn the company around Plan People Profit

Functional Fanaticism Typical Business Strategy Development Accounting and Finance IT HR Firm Leadership Production/ Operations Marketing

Business and IT Must Merge If IT does not have access to the strategic plan, IT will not be aligned with the business If IT is not included in strategic planning, the business will lose some of the competitive advantages that IT can offer

Integrated Strategy Development Integrated Ongoing strategy discussion IT Production/ Operations Marketing Accounting and Finance HR Firm Leadership Business Strategy Development

The Value Net Objective is to move players to different boxes in order to create additional value. Look at relationships creatively. Examples: Turn a substitutor (competitor?) into a supplier, a customer, and a complementor Can you turn your fiercest rival into your strongest ally?

Thomas A. Stewart, Intellectual Capital Company’s Capital

“ Success in the marketplace today is directly proportional to the knowledge that an organization can bring to bear, how fast it can bring that knowledge to bear, and the rate at which it accumulates knowledge.” Tom Peters My Hero!

Commodity There are no mature industries, only mature managers who unthinkingly accept someone else’s idea of possibility Gary Hamel

To be a success in business, be daring, be first, be different. Marchant

Look Outside Your Industry If you want to see the future of your industry, 90% will come from outside the industry. Gary Hamel How’s your peripheral vision?

Only stupid questions create wealth. Gary Hamel

Business Strategy - Recap Three Factors for firm growth Integrated Strategy Development Understand the marketplace Use a Value Net to identify new opportunities and leverage relationships Differentiate Look outside your industry

Management by objectives works if you know the objectives. Ninety percent of the time you don’t. Peter Drucker

IT Strategy It’s tough to create a strategy when you don’t know what’s going on

IT Must Know Business IT should support the business – to add value or increase profit, not suck the life out of the organization through constant upgrades, misaligned priorities, and useless activities.

Strategic Planning vs. Digital Strategy Downes and Mui, Unleashing the Killer App Strategic Planning Digital Strategy Nature Static Dynamic Environment Physical Virtual Discipline Analytical Intuitive Time Frame 3-5 Years 12-18 Months Key Pressure Point Five Forces New Forces Key Technique Value chain leverage Value chain destruction Participants Strategists, Sr. Mgt. Everyone (incl. Bus. Partners) Technology’s Role Enabler Disrupter Output Plan Killer Apps

The New Forces Model Traditional Sources Of Competitive Leverage From Downes and Mui, Unleashing the Killer App The New Forces Deregulation Globalization Digitization New Entrants Substitutes Competitors Suppliers Buyers You

IT and the Three Factors IT Supports Feeds Feeds Supports Create Creates Plan People Profit Plan People Profit Process Automation Creates

Generic Competency Map IT Supports, Enhances, and Extends

Purpose of IT Planning IT is a function that originally supported operations, but that now enables operations and additional revenue streams IT must translate the needs of the business into actionable initiatives designed to support, enhance, and extend the capabilities of the firm

IT Management Structures Centralized – all decisions are made centrally Decentralized – all decisions are made at the branch/business unit level Federated – a combination of centralized infrastructure and standards with autonomous local decision-making for specific needs

IT Strategy - Recap Understand business needs Realistically assess IT capabilities Map capabilities to firm competencies to enhance them Help business leaders understand IT’s capabilities – WIIFM Enhance People, Plans and Processes

IT Capabilities Business Strategy Support

“ The strange thing is that the majority of technology spending is decided by senior management who do not understand technology at all.” - CIO, Retail Industry

Aligning Business and IT Business leaders must understand that IT provides the foundation on which work gets done – especially in the knowledge working environment of professional services

Aligned Business and IT – What It Looks like IT capabilities mirror the needs of the business to help it accomplish its mission IT is integral to the strategy formation process IT leaders ARE business leaders There is no differentiation between IT and Business – they are synonymous

Aligned Business and IT – The Gap That Exists – Business View IT leaders don’t understand business IT is overhead – we need to keep it under control We can do our jobs – why should we spend any more money on IT? If the IT staff is not fixing computer problems, they shouldn’t be here IT works for production - we pay them You can’t measure results, so don’t fund it I can’t talk to IT folks – they speak funny

Aligned Business and IT – The Gap That Exists – IT View Business leaders don’t understand IT If the execs would include us in their planning, we could make a real difference All they want us for is to move and fix computers – we can do more Nobody understands what we do – we keep the company running I can’t talk to business folks – they speak funny

Bridging the Gap Business IT Sounds easy, doesn’t it? Big Wall Communication

Start with Communication Without open, honest communication between business and IT, there will be no alignment. IT must know what business leaders are trying to accomplish (strategy), and business leaders need to know what IT can deliver (capabilities).

Bridging the Gap – Communication Each must understand the other’s “language” at least basically Each needs to understand the other’s viewpoint about each function Each must understand how the other makes decisions Each must avoid using “funny speak” Business IT Communication

Bridging the Gap – Communication (cont’d) Shack up - work close together Have lunch now and then if you can’t live together – at least at the senior levels Encourage risk-taking and break-through thinking Can’t isn’t a word – figure out how to do what is needed and make sure everyone knows the costs Business IT Communication

Bridging the Gap – Communication (cont’d) Create shared goals that require IT to work with business leaders and units to enhance capabilities Teach IT how to think like “business people” Teach business leaders to understand IT’s capabilities to improve the firm Business IT Communication

Bridging the Gap – Distilled Speak plainly and make sure the other person understands you Live together or hang out regularly Understand each other’s worlds Include everyone in strategic planning Clarify expectations on both sides Business IT Communication

Ultimately, IT’s capabilities must match the firm’s needs and enhance the strategy or IT is not performing its full mission.

Integrating Planning To help align business and IT, plans need to work together to create the right capabilities for the right tactics at the right time

Planning Horizons Planning starts outside and goes in

Planning Horizons Coordinate Business and IT Strategies at least at the One Year and greater levels, if not further in

Integrated Planning Talk regularly about what is going on in each part of the business Discuss opportunities when they arise – not after one group begins pursuit

Integrated Planning Business leaders need to tell IT what they’re planning for so IT can prepare the infrastructure to support the plans IT needs to help business leaders understand how IT can support and enhance business operations Begin with the end in mind* From Stephen Covey’s 7 Habits of Highly Effective People

Planning Timeframes If IT and business leaders only talk during their annual planning retreat (if then), numerous opportunities along the way will be missed. Create an ongoing dialogue to discuss opportunities when they occur.

Difference Between Planning and Pursuing Opportunities Planning Opportunism Timing Advance Just in Time Timeframe Long Short to long Coordination Coordinate infrastructure, apps, processes Coordinate application of capabilities (projects) Management Foresight and defined structure Foresight and flexible control People Senior management Whoever it takes to get it done – ideas come from everywhere

B u s i n e s s S t r a t e g y I T C a p a b i l i t i e s Process: List each business strategy, then the IT capabilities needed to support the strategy. Assign priority % to each of the Business Strategies. Then assign priority % (not to exceed B.S. % above) to each of the IT Capabilities. Highest % is highest priority, etc. Copyright © Toolkits, Inc. 2003 Business/IT Alignment Tool Business/IT Alignment IT Capabilities Business Strategy Close to the Customer Expertise Global 50% 30% 20% Communication Project sites Collaboration server Proximity Anytime, anywhere access to information 20% 30% K Acqusition Online Learning K Capture KM Tools K Searching Search Engine K Reuse ? 10% 10% 10% Accounting Multi-currency Data Access Anytime, anywhere access to info Mobile Comp. Tablet PC 10% 7% 3% 37%

Process: List each business strategy, then the IT capabilities needed to support the strategy. Assign priority % to each of the Business Strategies. Then assign priority % (not to exceed B.S. % above) to each of the IT Capabilities. Highest % is highest priority, etc. Copyright © Toolkits, Inc. 2003 Business/IT Alignment Tool Business/IT Alignment IT Capabilities Business Strategy B u s i n e s s S t r a t e g y I T C a p a b i l i t i e s

IT Priorities Don’t assume that all IT priorities will come from the business strategy. Secure, stable computing is essential Depending on the firm, IT priorities may be higher than business priorities for a time (stabilizing a server vs. adding a new service) Eventually, there should be a good split between time spent on pure IT issues and that spent on supporting business strategy Business support is usually more valuable

Tips for IT/Business Alignment Business Leader’s Perspective Talk to IT leaders regularly Listen Don’t put them in a box. They probably know more than you think they do about the business Ask for ideas Share your plans for the future Make them part of the planning process Use their energy and creativity to move your business forward Invest in directed R&D

Tips for IT/Business Alignment IT Leader’s Perspective Talk to business leaders regularly Listen Don’t put them in a box. They probably know more than you think they do about IT Ask for ideas Share your plans for the future Make them part of your planning process Use their knowledge and experience to enhance the impact of IT Educate business leaders in IT capabilities

IT Priorities Infrastructure Stability Business Support Differentiation Relationship Support

Alignment - Recap Start with communication Use integrated planning approach IT must anticipate business needs Business leaders must understand IT’s capabilities

Covey’s 7 Habits Be Proactive – Just Do It Begin with the End in Mind Put First Things First - Prioritize Think Win/Win – Everyone wins Seek First to Understand, Then to Be Understood Synergize – 1+1=3 Sharpen the Saw – R&D

What Should We Measure? Anything that adds value to the organization Anything that exceeds the cost of measurement What gets measured gets done

What kinds of metrics exist? Financial Project performance Goal accomplishment Survey results Just about anything

“ Hard” Metrics Hours of downtime Financial cost of a project Time to deploy a new machine Number of new project web sites Training classes offered per quarter Anything that can be measured with numerical accuracy given available data

“ Soft” Metrics Customer Satisfaction Rating Ability of IT to meet business needs IT “fit” to business competencies Anything that must be measured by surveys, interviews, and other non-numeric means

Defining Metrics Determine factors that are critically important to your company Identify measurements within each of those factors Determine how you will generate data for each measurement Determine who is responsible for data collection and recording

Example: Joe & Jane Engineering

Determine Critical Factors Water resources is primary business AutoCAD is the primary tool used Measurements should include: Time to create drawings Reusable components from other jobs

Gathering Data for Metrics Use all the resources that appear to have any relevance to the measurements Determine the easiest way to get the data you need Assign responsibility to someone to gather the data on a regular basis

Using the Metrics Once you have all the data, distill it into a meaningful form, either as a rating number, a chart showing progress, or a scorecard that is used to measure the firm Share the metric results with others in the firm

Sample Scorecard Factor Goal Score YTD Time to Deploy New Machines 2 hrs ea. 95% 89% IT Customer Satisfaction Rating 85% 91% 90% Good backups 97% 94% 92% End User Training Time 40 hrs/mo 120% 105% Server Unplanned Downtime 10 hrs/yr 0 hrs 0 hrs IT Projects at or under budget 100% 100% 100% IT Projects meet objectives 100% 95% 97% Business/IT Alignment Score 90% 91% 87%

Metrics - Recap Define the needed metrics Identify sources of metric data Assign responsibility for gathering data on regular basis Gather data Distill data Report findings

Techs and Execs: Session Recap Business Strategy Creation – Integrated Strategy Development, Value Net, 3 Ps IT Strategy Creation - Digital Strategy Alignment – Live together, Communicate , IT in the Strategic Planning Process Metrics – What’s important for your company?

That’s All, Folks! Contact Information If you would like to get in touch for clarification, consulting, workshops, or facilitating business/IT integration, contact me here: Craig Mathews McKim & Creed – (919) 233-8091 [email_address]

Additional Resources Knowledge Management: Brint.com Corporate Instinct , Koulopoulos Intellectual Capital , Thomas A. Stewart Knowledge Management Fieldbook , Bukowitz Innovation, Expanding Markets, Vision: Competing for the Future , Hamel and Prahalad Fast Company - magazine The Innovator’s Dilemma , Christensen Unleashing the Killer App , Downes and Mui

Techs And Execs - Aligning Business

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