CXO

IT must have role in developing an effective business plan

The only way companies can achieve true strategic alignment is with IT at the table helping to shape enterprise goals from the beginning of the process.


All the articles being written about the importance of aligning IT strategy with business strategy probably demonstrate that something's still amiss. At the same time, current thinking on the development and alignment of strategy is changing. The days when senior management formulated the business strategy and then handed it over to IT to align with are, thankfully, starting to fade. That’s a reactive approach and one that is actually the crux of many alignment problems. If a CIO is still waiting for the business plan to arrive before starting to work on developing the IT strategy, he’s arguably already behind.

Increasingly, high-level strategic planning is becoming an all-inclusive process, conducted by the senior management team, including the CIO. This is the only way companies will achieve true strategic alignment, with IT at the table helping to shape enterprise goals. And perhaps alignment is no longer even an appropriate concept. In this context, congruence or co-evolution may be more appropriate.

Co-strategy development
The process of co-strategy development is the approach taken by pharmaceutical manufacturer AstraZeneca. CIO Robert Cohen, who spoke at a recent CIO Perspectives Conference in California, said, "the next stage of business and IT strategic development—co-evolution—is critical. The business strategy shapes the IT strategy and the IT strategy in turn shapes the business strategy." AstraZeneca's vice president of marketing, Richard Fante, who presented jointly with Cohen, agreed, and emphasized "that cooperative strategic development is now an integral part of the company's planning process."

It is vital for IT to be in the loop during strategy development, to ensure that all parties know when the technologies do or don't exist to meet the organization's requirements, and to ensure that the implications of the various business units’ proposals are identified and considered during the planning process. Take the case of an insurance company whose directors are planning to grow the business by 10 percent over the next year by offering Web-based services. They need to know if the infrastructure exists to support that service and, if it needs to be built, how long it will take and how much it’s going to cost to implement and support.

In many organizations, it’s the enduring distinction between the business and IT that still seems to be at issue. IT can't be separated from the business—it's a vital, core business function in most organizations. For the collaborative strategic approach to work, much hinges on the quality of the CIO’s relationships with the CEO, the executive team, and the business unit managers. To effectively contribute to the development of business strategy, the CIO must work closely with the business unit managers to understand the directions they are taking. They, in turn, need insight from the CIO about current directions in technology.

Strategy disconnect
A classic example of strategy disconnect occurred in a large professional services organization that, not surprisingly, declined to be named. One consulting arm of this firm provides technology solutions to internal and external clients, and part of its strategy included moving heavily into the development of online solutions for project and document collaboration. This involved a significant investment in hardware, training, and software development, and was forecast to represent a significant percentage of the group's revenue. But it wasn't until a chance meeting occurred between the CIO and the business unit manager that it was revealed that IT was planning to upgrade the document and information management solutions for the company as a whole, and that this would include a method for the rapid deployment of online solutions.

The effect of this was that the consulting group would, in all likelihood, derive much less revenue than originally forecast from custom development. The CIO had no idea what the consulting group’s strategy was. The consulting group, while generally aware that systems were being upgraded, had no idea what the actual ramifications of the upgrade would be. Had there been a collaborative approach to strategy development at the outset, both camps would have known the direction the other was considering, and this would have given the consulting group the opportunity to reassess its strategy, leveraging the investment already being made by the company in the IT upgrade, and focusing its development in more lucrative areas.

Collaborative development leads to right strategy
At UPS Inc., vice president of information services Stu Sutliff is also involved in collaborative strategy development. When interviewed about strategy alignment by CIO Magazine, Sutliff said, "We have an annual meeting in the company for all of the directors, and we're not just talking IT—you're talking about the entire company—to roll out the corporate strategic imperatives for the year." Sutliff went on to indicate that they then determined what those imperatives meant for the different business lines and functional groups in the organization, and that the strategies and metrics of the individual departments were subsequently mapped back to the original plan.

Without IT at the table during the formulation of business strategy, horror stories will continue to abound about disconnects occurring between IT and the business, and about what happens when technology decisions are made by executive management in absentia. When decisions are made without a firm grasp or appreciation of the enabling technologies, you can bet that project budgets will blow out, user expectations won't be met, and the organization will be left with half-baked solutions.

Formulation of a business strategy should represent the collaborative efforts of the whole executive and management team, with the CIO adding insight about technological directions and innovative ways technology could be used to add value and provide competitive advantage. With a collaborative approach to strategy development, aligning IT strategy with business strategy isn’t a separate exercise—it’s already part of the plan.

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