How Successful Companies Synchronize Business, ITBy CIOinsight | Posted 07-01-2002
How Successful Companies Synchronize Business, IT
Marianne Broadbent wrote her doctoral dissertation at Australia's University of Melbourne in the late 1980s on the need to align information technology and corporate strategy.
Has the alignment gap eased since then? "Things have gotten better, and they've gotten different," Broadbent told CIO Insight Executive Editor Edward Baker in a recent interview. "There is much more penetration of CIOs involved in strategy-setting as part of the executive team, chiefly in organizations where IT is important to how the organization competes."
Broadbent, who coauthored Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology (Harvard Business School Press, 1998) with Peter Weill, is vice president and director of research at Gartner Inc.'s Executive Programs Worldwide, where she investigates such issues as the fusion of business and technology strategies and investments.
CIO INSIGHT: How do you define strategy?
Broadbent: Strategy is very much about synchronizing the enterprise with its external environment as much as possible. Think about how increasingly interconnected economies, markets, technology and political situations are. Sept. 11 is a great example of how quickly things can change and how interdependent logistics, for example, is with strategy, with customer service, with the politics of what's going on at the moment. I look at strategy more as synchronization, and that which focuses much more on what we call the market inputs rather than the outputs.
Previously, for example, what organizations focused on was what they needed to achieve, in fairly granular terms, within the next three to five years. Today, though, organizations are much less focused on that simply because you can't control for as many factors as you could in the past, and the situation is very volatile. In the past, we focused very much on our processes. That's useful, but it's probably not as useful as focusing now on what we call our inputs and aspirations, and I'd link those two together.
I'm not saying that it's not important to plan and strategize. I think it's absolutely critical. But much more, it's a sense-and-respond world where on one level you need to focus on your strategic aspirationswhat you really want to be when you grow upand tie those to what your customers are demanding at any given time. Maybe it's a travel company being like a companion, always there. For a car company, it's being some form of personal communication. So those are aspirations. But then you need to come back and ask, "OK, which business principles do we want to guide us on how to get there? Do we want to do it by being very focused on customers, or do we want to do it by being very focused on cost?" And so on.
Once you decide these things, you can decide which inputs and capabilities are most important to you. What are the attributes we believe we need to have? Maybe it's a very well-trained group of people. Maybe it's a terrific knowledge-based system. Maybe it's a certain kind of technology capability. Maybe it's always having a supreme brand. It's about which inputs are important to you.
When creating a strategy, I see a number of steps: the aspiration, the big business principles or maxims, then having a number of scenarios or options which are based on a set of strategic assumptions that you constantly, constantly pick to see if they are in sync. And then you use that information to shift and change. At a tactical level, that means rolling out products and services in a very careful, risk-managed way so that you can sense and respond to the marketplace.
The CIO's Role
In that context, how do you see the CIO's role?
It's twofold. First and foremost, he or she is part of the executive team with very, very good antennae into the environment. The CIO is probably one of the few executives who have a helicopter view of the organization. I see this again and again. The CIO is one of the few peopleoften the CEO and the COO might be the only other people, and maybe the CFOwho understand all the Lego blocks that comprise the enterprise.
If you've got a multibusiness enterprise, generally the presidents of the business units do not understand how all the parts fit together. I've run a lot of workshops for executives where we are looking to identify the shared things the organization needs to do. I'm not talking just about technology here but also about business strategies. And again and again, those business-unit presidents will answer to their business units and not to the company as a whole, even if they make the point that what they're doing is for the good of the company as a whole. So CIOs can be very much tuned in to what's going on and understand how all the pieces fit together.
The second important role that the CIO can play is to amass real-time information for the company to constantly monitor for strategic assumptions. What are the numbers coming in? What's the customer response? What's the way we are able to aggregate internal and external data? What's the best way to use technology in order to prompt questions rather than to answer questions?
So the CIO's role is, first, as an informed executive and, second, as the top player in what you might call aggregating and integrating data to test strategic assumptions, so that the company can be a real-time, sense-and-respond enterprise. When you're managing and focusing on strategy for the input you're getting as a company from the marketplace, then you need the information that goes with that so you know which way to move next.
How do you think CIOs can help most to bring about a particular strategy goal?
First, CIOs have to know the business, they have to understand intimately what the business is about, and they have to behave like an executive and know the individuals involved. And only in that way, I believe, can CIOs help shape the strategic goals of a company. Now, often, they don't earn that right until they've shown that they can also deliver, and there's a huge paradox here.
While shaping strategy is part of what CIOs need to do, sometimes in order to earn the right to help shape strategy, they have to be seen as someone who's delivering the goods. Put it this way: You can't earn your place at the executive table without being perceived as having delivered cost-effective services to the organization. Now that may be an unrealistic requirement, but that's often the case. Life isn't fair.
So CIOs must manage two essentially conflicting roles?
Yes. The first is to shape and manage informed expectations, and that is what we call the demand side of the CIO's job. That's working with the executives, working with their business colleagues, and that's a heavy relationship role.
The second role has to do with delivering cost-effective IT-enabled services, and that's what we call the supply side of the CIO's role, the ability to supply, or deliver, the stuff.
This paradox must be everywhere.
Well, if you have both demand and supply roles, then you have to be perceived as being able to deliver, deliver, deliver. And there's something else to consider. The whole issue of setting expectations is important for a CIO in that he or she often has to negotiate and work with trade-offs. You can't continually say yes to things you can't deliver on.
But there's a heavy education and coaching role for CIOs as well, to help executives understand what IT can and cannot do. CIOs also need to educate executives about what they themselves need to deliver, so that their own expectations of IT can be met. Often, the CEO has unrealistic expectations about what IT can deliver, and that's often why the CIO role is sometimes split between someone who does the demand-side IT stuff and someone who does the supply-side IT stuff. You can't have top-level personal qualities in all those areas in one CIO.
Are CIOs Expendable
Are CIOs Expendable?
Do you sense some frustration against CIOs who aren't all things to all people?
I think some companies, a number in the manufacturing area, have dispensed with the corporate CIO over the last year or so. They've gone from having an office of the CIO to a more devolved structure, in which case they don't believe they need a CIO. And they buy in services, and they don't see a need to have someone at a strategic level. I think that's a mistake.
So business and IT need to be synchronized, if you will, in order to achieve alignment?
I think of it this way. Nonalignment is a natural state. Alignment is not the natural state. Alignment assumes you've got everything absolutely in sync at the same time. This is never going to be the case because the speed at which things develop externallyin the business and technology environments is very fast. The speed with which you can respond to those changes internally as an organization structurally, culturally and technologicallyis much slower. Therefore, things are never going to be completely aligned, nor should they be. If they are aligned, then either your business objectives are too modest or you've over-invested in technology, one or the other.
Think of cogs in a wheel, all moving at different speeds. You have to be able to link up in ways such that the cogs can still turn. Some are going to be turning more slowly than others. That's what we mean by synchronization. It's a different way of thinking from alignment, but it very much plays into the very volatile business situationtechnologically, politically and sociallythat we have now.
Do many companies understand this?
Certainly, about 50 percent of our executive program members report to the CEO directly, which is an increase over previous years, but then that's still only 50 percent. And it's only one measure.
It's not so much that the CIO is now more important, it's that the penetration of technology and the importance of information and communication have become much more important to a company. So it's now more important that someone has a good grasp of that on the executive team, someone who can identify and help other executives to identify what's possibleand then be able to deliver what's possible.