20th

Too often it seems that almost the singular focus of IT has been to cut costs within the company.  There is no doubt about technology’s capability to bring organizational efficiency and reduce costs; however, when cost-cutting is the primary focal point, it can mean little attention being given to the ability of technology to help increase revenue, improve customer retention, enhance competitive differentiation, etc. ??????????????????????????????????????

What caused IT departments to become so narrowly focused on cost-cutting?  Obviously years of economic uncertainties and difficulties had a huge effect.  But perhaps factors internal to the company played an even larger role.

Instead of seeing themselves as business professionals with an expertise in technology, many IT professionals instead view themselves as technologists.  As a result, they have not concentrated on truly learning the business of the company actually cutting their paycheck.  After all, the reasoning seems to be, why should I see myself as a banker or a manufacturer when my technical capabilities will easily allow me to move to another industry the next time I need a job.  Failure to gain a knowledge of the business makes it easy to see why these IT professionals do not speak the language of business… they don’t know it.  We all know the difficulties this causes in communication, but we must also admit that this lack of business knowledge prevents IT professionals from contributing as much to the success of the company.  It also makes it extremely difficult for IT to communicate the value they are bringing and likely prevents them from even being aware of what they might be doing to enhance competitive advantage or increase revenue.  Without exhibiting a firm grasp of the business, IT is often pushed into an order-taker role.  And it doesn’t help that the natural introvert tendencies of many IT professionals (including the CIO) are sometimes allowed to become barriers to developing solid relationships with corporate leaders within other areas.

I’m not telling you it’s going to be easy. I’m telling you it will be worth it.

When IT is seen as a cost-cutting mechanism that is simply fulfilling orders, it quickly becomes viewed as a cost center.  And how is a cost center typically managed?  You do everything you can to minimize its costs to the business.  IT spending cuts cause a larger percentage of its budget to be used in keeping the lights on and less money to be available for moving the company forward.  With this, IT falls further and further behind.   Others in the C-suite then see IT as a back office function… similar to facilities management.  They see no value in involving the CIO in the strategic planning process since, after all, the facilities manager isn’t typically included either.

So how can we change this game?  Here are a few practical suggestions:

  • Change your approach.  Become a technology enabler rather than a controller.  Transfer as much of the IT budget as possible to be owned by the responsible business unit.  Identify the true costs of each IT service, and provide the C-suite with benchmarks comparing the cost of your services to that of outside providers.  Become a consultant and advisor rather than a sole-source provider.  Look first to buy and integrate unless there is a significant advantage in building.  Help the business decision makers understand the pros/cons, risks/rewards of each available option…then step out of the way and let them make the decision.  Explore ways to continually improve the speed and flexibility of your company and of IT…and then implement them quickly.  More to come on this approach in future blogs.
  • Change the IT Culture.  Tear down the barriers that separate IT from the rest of the company.  Educate the entire IT department on the business.  Invite leaders from other areas within the company to make presentations on how they contribute to the business.  Gain an understanding of the metrics they use to measure the success of their department.  Know how these metrics are trending.  Ensure everyone has an understanding of the company’s products including pricing, contribution to profit, target customers, and key selling points vs. competitive products.  Know your competition.  Understand how they are attempting to sell against you.  Encourage your staff to stay alert to what your competition is doing.  Watch how other industries might be using technologies that could be applied to your business.  Network with your vendor community.  Become vigilant as to potential disruptors that could affect your industry and your company.  Shadow each area of the company to understand how business flows.  Go on sales calls.  Become obsessed with looking at things from the point-of-view of your company’s customers.  And remember that all this education is not just some academic exercise.  The intent is to change the IT department into a dynamic organization that is focused on the business rather than simply on technology.  Make it a regular part of IT life to discuss the contributions you are making to the company and how you might make even more.
  • Change the conversation.  Use this business knowledge to change your approach to others within the company.  Instead of focusing on costs, turn the conversation to focus on value.  This may mean that you have to help the business unit better articulate the value they anticipate from a project.  (One study reported that 69% of IT leaders said their IT project teams do not regularly have an understanding of the project’s business objectives.)   Use your knowledge of each business unit’s key metrics to suggest ways in which IT can help them.  Regularly talk with other corporate leaders about what you are seeing in the industry.  Make recommendations to improve customer intimacy and retention.  Identify external data sources that might be combined with your corporate data to enhance knowledge of your customers.  Be sure to educate your C-suite on the potential effects of digital transformation on your industry.  Explore with them ways in which to use digital technologies to break down silos, consolidate processes, integrate your supply chain, and better empower your customers.

What other suggestions do you have to help IT move from being seen primarily as a cost-cutting mechanism to recognition as a true difference-maker for the business?

4 Responses to “Moving IT from Cost-Cutter to Difference-Maker”

  • KenHittel says:

    Kudos — a great piece. Too many instances of agreement to detail them all.

    My experience in IT is slightly different, but no less problematic, than the norm described well here — I came from the business side, spent five years “in” IT, then returned to the business. Cost-cutting in IT? Yes, but only because it was mandated by the CEO; it was always resisted as much, and as successfully, as possible. Cost-cutting by the business(es)? Also resisted as much as possible, because those budgets helped feed the IT machine. Questioning of business projects for improvements, enhancements? Almost never; The business knows what it wants and our job is to provide it, even if we think (we know) they are wasting money.

    In my five years in IT I never once heard any of my exec colleagues suggest anything to “enhance competitive advantage or increase revenue” — never once. (This wasn’t true of the worker bees, quite the contrary, but they had, of course, little voice in decision-making.)

    • Terry Bennett says:

      Ken, thanks for your comments.

      I find it really sad to think that people on the front-lines are not heard. In The Idea-Driven Organization: Unlocking the Power in Bottom-Up Ideas, the authors noted that organizations using a top-down approach on idea generation gain only about 20% of the benefits. In other words, 80% of the ideas are generated by front-line employees who are doing the day-to-day work. Our challenge is to establish the trust and then set up the proper processes to capture and act on these ideas.

  • Alex Forbes says:

    Realize this is an older discussion, but one that continually comes up on The Fast Track by Intuit QuickBase. What I hear from mid-market CIOs is providing the business the keys to build their own applications to get the backlog off IT, but keeping the master key with some proper governance in place to ensure things don’t go rogue. Trust with some real-time prototyping between business and IT, enabling the front line employees to help IT establish 70% of an application to improve their business process, then taking it the last mile and maintaining it themselves without IT involvement makes everyone happy. Hear some examples in this quick video: https://www.youtube.com/watch?v=c0N9eyRXaUE
    Best,
    Alex
    Cambridge, MA

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