Management MattersBy CIOinsight | Posted 12-21-2002
In September, CIO Insight cosponsored a conference on IT-business alignment with the Balanced Scorecard Collaborative Inc., the strategy alignment consultancy. Technology and business leaders at a variety of companiesfrom paper producer Boise Cascade Corp. and healthcare provider Cardinal Health Inc. to Walt Disney World and Canada Post Corp.discussed their efforts to create strategic partnerships with business leaders in hopes of using technology more profitably. In their presentations and conference interviews with CIO Insight editors, the executives shared lessons from the front lines on how best to create and manage these difficult relationshipsand keep them healthy.
The key lesson: Technology is the easy part. Willingness to take on the challenge of managing cultural change is much harder. But without it, strategic alignment will always remain a pipe dream.
Within that context of management, CIO Insight Executive Editor Marcia Stepanek heard four critical elements of alignment success emerge during the conference: agreement on strategy from every level of the corporation, the need for IT credibility, the value of financial incentives to spur alignment, and the danger of falling off the alignment bandwagon when times are tough. What follows is her report.
Alignment Is a Management
Alignment Is a Management Issue
"The nub of why alignment is so hard is that fundamentally you're talking about culture change and behavior change in people."
John Scanlon, vice president of line of business technology management, Capital One Financial Corp.
Forging effective IT-business partnerships has never been easy. It's continuous work, and the tough part lies in the detailshow well you communicate with your peers, build teams and push the strategy message to the lower ranks of the organization as well as to the higher-ups.
A July poll of IT and business executives by CIO Insight shows the track record remains dismal on all fronts. According to that survey, 69 percent of IT and business executives say their companies do not measure the degree to which company strategy is understood throughout the company, and only 37 percent of IT executives and 32 percent of business executives say IT is very involved in the development of business strategy. Further, only 14 percent of IT executives and 22 percent of business executives say they have a formal way to track their performance to the company's strategy goals.
Said Capitol One's Scanlon at the conference: "It's like the Dr. Seuss story about two different camps of characters, one that butters its bread on the top and one that butters its bread on the bottom. In all other respects, they're similar, but they both have this seed of difference in how they view the world that triggers difficulties in language and communication, and breeds mistrust. And that's the challenge we have in IT-business relationships as well. We need to find ways to build bridges so we're in alignment in thought and in action and in practice."
Alignment Demands IT Credibility
Alignment Demands IT Credibility
"In a healthy company, a CIO has got to be able to tell the CEO that cutting tech investments by 50 percent might be the dumbest thing he ever thought of."
Bill Zollars, CEO, Yellow Corp.
For many executives at the conference, aligning IT and business strategy first meant having to boost the credibility of IT. According to Elaine Beitler, CTO at Manhattan-based Bowne & Company Inc., a financial printing and document delivery company, IT "didn't have any credibility" when the company kicked off a project to digitize operations in 1999. "We were seen as slow and expensive," she said. "We were inefficient in the way we delivered systems, and in-house surveys showed IT employees were not clear on the business strategy. It was frightening."
So Beitler convened meetings between IT and business leaders and middle managers at the company to air differences and exchange criticisms. "It was not wonderful to hear that in some cases, our technology was a weakness," Beitler said. "But we needed to hear that to start building a stronger partnership with the business."
Building credibility also can mean doing a better job managing expectations for IT. Three weeks into a $25 million CRM project, "nothing was happening, and the business side was getting impatient," said David Goudge, senior vice president of marketing for Boise Office Solutions at Boise Cascade Corp. "We were not even moving, we were missing our internal deadlines. The CIO agreed." Goudge's solution: Set goals for change, but be clear in how you want IT to get there, even if it means creating new rules or resetting expectations. "We brought the CIO into the room, and I said, 'Look, hear me clearly. You don't have to be 98 percent assured that what you're going to do is going to be right. You can be 80 percent sure. It's okay with us if you screw up at 80 percent. We just need to get going, and fast.'" It worked. "Our IT culture needed to hear that, to be given permission from the business side," Goudge told the conference. "IT had gotten used to getting beat up if it did something wrong. We needed to change that part of the culture to be able to work together better."
But credibility requires honesty. When Boise first started its push toward CRM, one of the first steps needed to kick off the project was to take stock of what Boise had and what it needed. "We had a bunch of data buckets everywhere that weren't usable," recalled Goudge. Part of those early talks required both sides to speak frankly about what wasn't working. After a while, Goudge said, "I began sitting there thinking, 'Oh man, are we screwed up.' But it felt good. Why? It meant we were being honest, and that meant we could get better."
Alignment Is About Keeping
Everyone on the Same Page">
Alignment Is About Keeping Everyone on the Same Page
"Communicate, communicate, communicate. You build strategy from the top down, and you execute it from the bottom up."
Stephanie Parson, vice president, IT strategy and methods, Walt Disney World Co.
Disney's Parson found out the hard way that one should never take management buy-in for granted. When Parson first came to the entertainment and resort company in late 2000, she began an aggressive effort to help IT and business units, for the first time, sit down together to map strategy goals for the company. Parson and her team spent months meeting one-on-one with key business leaders to start the difficult conversations required at the consensus-driven Disney to get alignment off the ground. But then, on Sept. 11, 2001, terrorist planes hit the World Trade Center and the Pentagon, and attendance at WDW plummetedand hasn't fully recovered, triggering layoffs and stiff budget cuts, most of which remain in effect. Besides losing some of her staff, Parson's bid for more money for continued alignment consulting work is now on hold.
Looking back, Parson said at the conference, her initiative to create IT-business strategy at Disney, using the help of the Balanced Scorecard Collaborative, might not have been cut had she and her IT team won better buy-in from higher-ups. "We thought we had buy-in, but we never went to check and recheck and recheck again, and that hurt us," she said. Added Kathy Brittain White, executive vice president and CIO of Cardinal Health Inc., "Don't expect to go in and make one senior management presentation and think that if people nod their heads, they've got it. You've got to keep working at it. Communication is an intense process. You start with a group of converts and you just continue to move on out to get it into the very tentacles of the organization."
And don't underestimate the difficulty of changing employee behavior, said Boise's Goudge. At first, Goudge said, he didn't want to do any formal change management training at all, and turned down a request that Boise pay $1 million for change management consultants when working to install and develop the new CRM system, "which would revolutionize things at the company, change things considerably," he said. "I said, 'No way. I know how our company acts; I'll just go out and give a speech or two and they'll follow me like crazy, and there will be no problem.' But I was a fool," Goudge told conference participants. "We tried doing that, and it collapsed. We didn't get the training out to the people quickly enough or well enough. Change is hard stuff to sell."
But don't overdo it, either. Let business and IT leaders forge teams according to their own management styles. Said Yellow Corp. CEO Zollars: "I never took much stock in Outward Bound, the 'Let's climb a mountain together and sing Kumbaya' types of efforts to build teams and facilitate strategic conversations. It's not real. People don't have time. You've got to build teams by making everyone see what their job is in terms of the business goal. You don't have to like the guy sitting next to you or know what kind of dirt bike he rides. You do have to know what his role is in the overall strategy so that you and he can work together to do a better job."
Last but not least: Passion. It's not enough to make your own message clear. "IT needs to be sitting across the table from the business people, hearing about the business the company has on the line if technology can't helpor can," Goudge said. "It gets the blood flowing, it gets the heart pumping, you hear what business leaders are saying."
Tying Alignment Goals to
Compensation Can Boost Progress">
Tying Alignment Goals to Compensation Can Boost Progress
"People knew their pay was tied to [success], so they came to our meetings sometimeseven if they just wanted to hear us argue."
David Goudge, senior vice president of marketing, Boise Office Solutions, Boise Cascade Corp.
Money also talks. More and more companies are using incentives in pay to get IT and business people talking to each other about business strategyand sometimes, to attend regular meetings on strategy.
That's been a key factor of success in Canada Post Corp.'s five-year, $300 million (Canadian) technology overhaul to help CP compete with stiff competitors like UPS, said Aaron Nichols, CP's general manager of business transformation. From the very beginning, executives were paid to take part in the digitization and e-logistics project. To make sure it would work, CP created a panel called the Business Transformation Management Committee that was chaired by the executive vice president of business development. The team of nine vice presidents has been meeting for three hours every week for more than two years. "To get nine vice presidents to commit the bulk of their Monday afternoon for more than 104 weeks running is no small task," Nichols told the conference. At some companies, Nichols said, a lot of projects are kicked off with "lots of executive support. Everybody stands up and cheersand then people start distancing themselves from it and hope it all goes away." But this one? "These guys have stuck with it," he said.
True, many people wanted to see the project get off the ground. But just to make sure everybody kept talking to each other, roughly 10 percent of their compensation package was tied to the success of the project, and "the company had a very interesting way of measuring that 10 percent" across the executive levels, Nichols said. "In our company, we've used that technique a great deal to get projects moving."
Alignment Can Boost Agility
in Tough Times">
Alignment Can Boost Agility in Tough Times
"We are in a business malaise, and it's very dangerous for CIOs, for they risk overreacting to huge cost-cutting demands that can damage the organization."
Richard Nolan, Harvard Business School
Given the weak and volatile economy, many IT and business executives at the conference agreed on one critical element: IT-business alignment is more critical than ever. Richard Nolan, the William Barclay Harding Professor of Management of Technology at the Harvard Business School, told attendees that today's economic malaise is forcing companies to be ever-smarter on strategysmarter about what they cut, what they keep, how they find opportunity in a downturn and what they plan to do when better times return. Only in companies where IT and business have forged a mature partnership can that happen, he said.
In these tough times, companies that cut strategy in favor of short-term cost- cutting, warned BSC's Robert S. Gold, risk losing their competitive edge against companies that keep the IT-business strategy fires burning. "What seems to be happening is that IT projects are being delayed," Gold said. "We're not making as much of a continuing investment in technology. The infrastructure is coasting and in some ways delaying the strategic investment that allows business units to set their sights emerging from this economic slump, to position themselves to establish competitive advantage once the economy improves."
Gold even predicted a "sorting out" of firms that have "cut off their noses to spite their faces" by trimming so much from IT investment that they're ill-positioned to compete later. He said smart companies continue to make some carefully targeted strategic investments in IT that will position them better when the economy improves. Companies that sacrifice IT-business strategy for short-term cost-cutting, he added, "will be the firms that will be seriously disadvantaged in the years to come."
: Creating the IT-Business Connection">
Forging Alliances: Creating the IT-Business Connection
Bowne & Co. Inc.
$1 billion financial printing company
Business Problem: The Internet forced 227-year-old Bowne to start competing on digital delivery, speed, personalization and heightened security.
Solution: Complete overhaul of IT strategy and organization.
Alignment Challenge: Build IT credibility, cut IT costs, speed project development and get IT employees clear on the business strategy.
Management Fix: Created an IT strategy that aligned to the business, devised project management metrics, tied progress to compensation, created continuous feedback loops to keep IT on course with business goals.
Payoff So Far: A more closely aligned IT-business strategy and new business-focused IT culture.
Canada Post Corp.
Canada's $2.8 billion national postal service
Business Problem: A government-mandated review concluded that CP was in a sunset industry, heading for extinction against Web-enabled rivals like UPS.
Solution: Launch $300 million (Canadian) project to overhaul CP to enable digital deliveries and e-logistics.
Alignment Challenge: Make IT a partner with business.
Management Fix: Created a top-level business transformation committee that tied participation to pay, created "business transformation coaches."
Payoff So Far: Two years into five-year project, self-service postal services are in partial rollout (ROI pending).