Posts Tagged ‘IT value’

8th

It can be very challenging to manage a cost center where the CEO feels that the value provided is insufficient for the costs.  Yet that is the very situation many CIOs face every day.  How did such a difficult circumstance arise, and what can be done to overcome it?

If the CEO thinks IT doesn’t deliver enough value for the buck, that can’t be a good thing

Years ago I recall reading that the purpose of technology within a company is three-fold:  increase revenue, reduce costs, and enhance the differences that cause a Finding Valuecustomer to select our company over our competition.  But while we understood this in a theoretical sense, IT at most companies became primarily dedicated to cutting costs.  Many of the factors contributing to this were addressed in my post on Moving IT from Cost-Cutter to Difference-Maker.  As this post indicated, cost centers are typically managed by continually reducing their budget.  This results in an even larger percentage of the IT budget dedicated to keeping the lights on and fewer dollars available for technology projects to move the company forward.  It is important for IT to move away from being seen as a cost center toward being a business driver.

But even being seen as a cost center does not necessarily cause the CEO to believe that IT costs are too high for the value received.  After all, you don’t often hear that cost centers like Accounting or Procurement are too expensive.  And while the size of the technology expenditure quickly shines a spotlight on IT, that in itself doesn’t mean that the company is not receiving enough bang for its technology buck.

How is the CEO supposed to know the value IT brings?

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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.

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10th

There has never been a stronger need for a solid relationship between the CEO and CIO.  Rapid technology advances are causing changes in societal behavior which in turn are having a profound effect on business.  Social and mobile technologies have given new power to the customer to compare products, solicit/discover third-party product recommendations, publicly voice their support or displeasure, and buy from anywhere.  This has ushered in the ‘Age of the Customer’ which Forrester defines as a “20-year business cycle in which the most successful enterprises will reinvent themselves to systematically understand and serve increasingly powerful customers” (Technology Management in the Age of the Customer). Connecting

Technology is also enabling disruption of entire industries.  Think about the effect, for example, that Amazon has had on retail brick & mortar booksellers.  In fact, an IBM study found that 41% of CEOs expect increased competition from companies outside their industry in the near future (The Customer Activated Enterprise).  They also recognize that companies within their industry are using big data/analytics to improve their decision-making and more precisely target customers.  CEOs are placing a priority on shaking up the status quo in their organization.  There is a sense of urgency and a push for innovation, and technology is obviously a major part of the solution.

But in too many companies, there is a disconnect between the CEO and the CIO.  Jim Stikeleather writes in a Harvard Business Review blog about a research study on the changing role of the CIO and IT (The IT Conversation We Should Be Having).  In short, the study found that CEOs believe that CIOs are not in sync with the new issues CEOs are facing.  In addition, CEOs feel that CIOs do not understand where the business needs to go and do not have a strategy truly supportive of the business.  More specifically, almost half of CEOs feel IT should be a commodity service purchased as needed and do not feel that their CIO understands the business nor how to apply IT in new ways to the business.  Moreover, a KPMG survey found that only 5% of executives feel that their business and IT strategies are 100% aligned (Executives See Disconnect Between Strategy and Technology Within Their Organizations).  Given this, is there any wonder at the call for the elimination of the Chief Information Officer position and/or the addition of other C-level positions like the Chief Innovation Officer, Chief Data Officer, or Chief Digital Officer? (Will CDO Steal CIO’s Leadership Role?)  Yet I can’t help but feel that the major issue here is that too many CIOs have not truly gotten involved in the business and have not worked to develop a solid relationship with the CEO and other C-suite executives.

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6th

Why is there such an emphasis on the need for IT transformation? 

Think about it.  If everything was poking along at a glacial pace and everyone was satisfied with the results they are achieving through IT, then there likely would not be such a hue and cry for IT to undergo radical changes.

But that is obviously not the case.  Social, mobile, cloud, and big data analytics are combining to create what some have called the perfect storm for disruptive innovation (The Wharton School, University of Pennsylvania, Mack Institute for Innovation Management).  

In his book, Here Comes Everybody (p. 160), author and NYU professor Clay Shirky wrote, “Revolution doesn’t happen when society adopts new technologies – it happens when society adopts new behaviors.”  Is there any doubt that social and mobile technologies are driving new societal behaviors?  And these new behaviors are having a huge effect on many elements of our businesses – marketing, sales, product development, customer service, and yes, even IT.

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30th

“How many of you know of a company where people aren’t real happy with their IT department?”  This question was asked in a room of executives from various businesses.  The response was immediate laughter.  There seemed to be almost unanimous agreement with the one executive who exclaimed, “No one is happy with their IT shop!”Dumb PC

In a commissioned study conducted by Forrester Research on behalf of BMC, 86% of the global business users surveyed reporting losing an average of 18 hours/month due to IT issues (Exploring Business and IT Friction:  Myths and Realities – free registration required).  That’s over 5 weeks a year!  #WOW!  Think about the effect that would have on the company’s bottom line!

 

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