Convergence, Yes; Alignment, No

By CIOinsight  |  Posted 09-19-2007

Convergence, Yes; Alignment, No

Beginning with the work leading to his first book, The Alignment Effect, Faisal Hoque has been on a seven-year-long "research journey" into the subject of alignment. He used his perch as the founder, chairman and CEO of BTM Corp. to organize the Business Technology Management Institute, a research organization made up of academics, CIOs and alignment experts. Together with members of the BTM Institute, he has come up with an alignment framework and several other books, including Sustained Innovation: Converging Business and Technology to Achieve Enduring Performance, co-authored with former CIO Insight contributing editor Terry Kirkpatrick and published in 2007.

Hoque's research on alignment has taken a surprising turn: alignment, which is usually defined as bringing IT into accord with a company's strategy, is insufficient. Rather than a goal, alignment is a stage on a journey to a more complete merging of IT and business that he calls convergence. Companies which achieve convergence, according to a recent study from the BTM Institute, achieve superior growth and earnings compared to other companies. CIO Insight Executive Editor Allan Alter asked him to explain what "convergence" means, and what else he has learned in his years as a researcher on alignment.

CIO Insight: Are you breaking the concept of alignment into different categories?
Instead, I am breaking alignment into stages of maturity. Alignment is the lowest and most passive stage; at the alignment stage, IT plays a support role; IT is always trying to catch up with what the business wants to do. Synchronization is the next stage. IT plays more of an active role by influencing how the business should operate: how the company goes to market, manages its supply chain or improves efficiency, or introduces a new product. The highest stage of maturity is convergence. Here IT and business are the same; there's no distinction between the two.

The business model is so intertwined with IT that there's no separate orientation. IT has become part and parcel of management's vocabulary. Companies that are very much in tune with the global economy, and are playing a significant leading role in terms of new business models and innovation, are very much converged when it comes to business and technology. It's obvious that Wal-Mart and FedEx are at the leading edge of the curve. Marriott, Starwood and United Parcel Service have also reached convergence. Are they all using the BTM framework? No. But they are using something of that nature. The fundamental point is they take a very holistic viewpoint towards technology.

Holistic Maturity

What else have you learned about alignment in last few years?
The most critical thing we've learned in creating these three categories is that alignment is a reflection of management maturity. There has to be a vehicle for measuring that maturity. Not technology or business maturity, but a holistic maturity that looks at organizational and governance structure, at the way companies make IT investments, at enterprise architecture, overall strategy and planning. That maturity shows up in a company's financial performance.

We've seen a significant change in terms of people's attitude toward alignment. People almost never talk about alignment any more, because alignment should be part of your job, not an achievement. Our industry is maturing.

The traditional thinking about the CIO role has to change. The CIO role is not a technology role but a business role that is focused on improving processes by utilizing technology. The CIO role cannot be a support role. It has to be a part and parcel of other roles; it has to be very holistic. At the end of the day, CIOs are the owner of information and process, so how can the CIO's role be just a support role?

This also brings us to the difference between alignment and convergence. Alignment is where CIO matches up with others' decisions. Convergence is where the CIO and management teams up. Governance means two different things at a company at the alignment stage and one at convergence. Governance in the alignment stage is concerned with project governance and setting budget goals. Governance at the convergent stages asks whether these projects are the right things to do, and will they have the business impact we want? That's a different governance role. The same is true with investment decisions.

Different Thought Processes

How do these differences in governance play out when making infrastructure decisions?
At the alignment stage, the CIO says, "My company is hiring 100 people because it is growing its sales force, so I will invest in an infrastructure that will support 100 new desktops." It's a simple decision. At the converged stage, the CIO may ask whether her company really needs 100 new sales people, or whether are there other ways to increase sales. The infrastructure choice then changes, because the CIO is no longer talking about 100 new desktops, but creating different kinds of sales and distribution systems. The investment decisions represent different thought processes.

The true test of governance is who in a company has decision rights, and over which decisions. Who's involved in these infrastructure decisions if you are aligned and if you are converged?
If you are buying 100 new desktops for sales people, the decision is already made in the sense of needing to support 100 new people. So from the IT governance point of view, the question is whether these new desktops are in compliance with the technology standards that are in place. That decision belongs inside the CIO or CTO's organization. In the other example, should we have 100 new sales people or a new distribution channel, the decision is a collective decision and requires a collective governance process with the CEO and CFO at the same table. In the first case, IT is providing s support; in the other, IT is part and parcel of a group decision.

Obsolete Enabler

For some companies, is it sufficient to just be aligned?
Any company for whom technology is a strategic enabler will become obsolete if it doesn't reach the convergence stage.

Are "converged" companies early adopters of technology?
A company does not have to be an early adopter of technology to be converged. In fact, it's a misnomer to think that just using new technologies makes you converged. Many of the companies that are not doing so well have new technology. They are misusing technologies. Now, we don't argue with the idea that companies have to adopt newer and newer technologies. Technology is getting better and better every day. The question is, do you utilize technology to make business better?

We're seeing evidence that CFOs are playing a bigger role in IT decisions. Are you seeing it too?
IT is very much an investment decision. So I'm in violent agreement with the view that the CFO is becoming more important in IT from an investment and legal point of view. CFOs are the owner of that, so their role will increase on that matter.

If CFOs are playing a larger role in IT, does it mean CIOs' role is growing smaller?
That's where the difference between the obsolete CIO and next generation CIOs come into play. Someone has to know technology usage. The CFO's role is not technology usage, but analyzing from a financial point or view whether IT investments are good or bad investments, and how we make money from operating cost. So it's not an either/or tradeoff for CIOs, but how they rise to the occasion. Are you the person who decides which desktop to buy, or what the sales and channels should be? I always see a CIO's role increase when he or she takes that point of view and develop the higher level skills they need. But I see few CIOs like that.