The unique role of the Chief Information Officer is to bridge the gap between business and IT, to work out what the business needs from information and technology in order to be successful, and then to deliver that in a cost-effective way. All that’s much easier said that done, but the Holy Grail is still “The Business Strategy.”
Or is it?
Many times I have worked with CIOs who are thrilled that they have finally made it to the executive table. Yes, they report directly to the CEO, and, yes, they are part of the top-level executive team. They think, “Now I will finally have access to The Business Strategy.” Feeling some trepidation and awe, they look forward to taking part in their first executive committee meeting, expecting that it will be different from simply being invited in to explain why the CRM project is over budget, or why the ERP-based business processes have met with such staunch resistance from the finance and logistics folks.
These CIOs are stunned to find that The Business Strategy is almost impossible to locate. Huge portions of what can be found in the documents that do exist remain the subject of ongoing arguments—sometimes constructive, sometimes not. What’s more, having spent years trying to second-guess The Business Strategy and then working through the implications of that strategy to shape an IT strategy, these CIOs find that they probably know as much about strategy-making as their fellow executives. And that is really scary. (So much for those stock options.)
Welcome to the real world of strategy-making.
Strategy is about how to create value for your constituency: your customers, clients, citizens, shareholders and broader stakeholders. It’s about how the board members and top executives envisage the business being profitable now, and even more profitable in the future (or about how they aim to make their not-for-profit or government agency successful).
At its best, strategy involves enunciating a clear statement of intent about what the company wants to be, or how it wants to be positioned. That statement should provide a context for action for every business area, product or service. Ideally, the implications for the company’s information and technology investments and reinvestments should also be teased out (though, sad to say, this is rarely the case).
But strategy is hard to do, and too few companies manage to get a good “tight/loose” balance between a clear focus on longer-term intent, and enough flexibility to shift tactics and implementation when changes in the market demand it.
Strategy is dynamic: It is constantly evolving as the business—its customers, products, processes and services—interacts with a volatile environment. Smart companies know their context and articulate their intent. But turning strategic intent into strategic reality requires a huge amount of discipline from both executives and managers. It takes a real appreciation of the necessary mosaic of capabilities required for implementation, as well as the ability to actually execute the plan. And as markets continue to change, turning strategic intent into strategic reality also requires that companies often revisit, and reevaluate, their intent, both so that they can keep working toward it, and so that they’ll know when their strategy needs to be modified.
Consider the story of a financial services company we will call FinFirst. The company had acquired several smaller firms for their high-value customer base, but getting value from the acquisitions proved tough, and, over time, it became obvious that FinFirst could no longer dissipate its energies over such a broad customer base. So, over a period of many months, the board sought to clarify the position that FinFirst hoped to gain in a tough marketplace. The outcome was an agreed-upon strategic intent: “To be the most client-focused, integrated financial services provider for high net-worth clients.” As a result, some parts of the business were divested. But what the newly focused strategy meant for each and every part of the business remained problematic. Did FinFirst have the discipline to cascade the new strategy through all the businesses? Would the company be able to reshape business processes and incentive systems around customers rather than products and services?
And where was IT in all this?
For the past ten years, some colleagues and I have been working with organizations to help them draw out the IT implications of their strategic intent and business goals. By tracking how, and why, some large enterprises obtained better value from their IT dollar, we started to see real patterns. Successful companies, it turned out, had a process for bringing to the surface a few critical business principles, or maxims, for which the IT implications could then be articulated. Importantly, business and IT executives did this together.
At these successful companies, both business and technology executives spent lots of time articulating the short-, medium- and long-term implications for information needs and major technology requirements—things that were sometimes called “IT principles” or “IT imperatives.” The discussions about how easy it would be to implement the IT component, and how much it would cost, were thorough. And the business folks listened, because they knew the IT folks and they knew they understood the business, the business processes and the background to the business changes underway.
We gave this process a generic name, “Management by Maxims,” and then worked through developing a structured way to help other companies better integrate their business and IT strategy and execution using this approach. (See “Management by Maxim,” Sloan Management Review, Spring 1997.) The business maxims draw not only on a company’s strategic intent but also on its balance between synergy and autonomy, between shared and “stand-alone” services—all of which have big implications for IT services.
These business maxims are used to derive IT maxims, which explain what is necessary to support and implement business strategy in language that any business—or IT—manager can understand. These then become the guide rails for the CIO and his or her team. The result is a clear trail of evidence leading back to strategic intent. Of course, such a trail has to be constantly reviewed for the inevitable shifts and changes that will occur along the path of strategy implementation.
Among the business maxims FinFirst chose: “Be proactive in meeting our clients’ needs”; “Provide a one-stop shop for a client’s financial services”; and “FinFirst synergies must be maximized across businesses.” These maxims presented quite a challenge in a company that had valued the autonomy of each business. And they had big implications for the IT maxims that followed: One of them— “Ensure that each client service manager has ready access to the full range of FinFirst’s products and services at the point of their interaction with the client”—led straight to a set of technology maxims about client profiles and consolidation of product information. But without the upfront process of business and IT executives continuing to work together to tease them out, there would have been no shared understanding of what it would take to deliver the business outcomes.
The lesson: Remember that strategy is a process, not an object. Getting the strategy done is not an end-state; it’s part of a continuous journey.
Marianne Broadbent, associate dean at the Melbourne Business School and a Gartner Fellow, is focused on achieving business and IT synergy. Her next column will appear in February.
