by Bob Riddell and Eric Ullman

7 Tips to Make Your Business More Competitive

Aug 12, 20087 mins
IT LeadershipOutsourcing

When cutting costs, tech managers should refocus their IT departments to make the business more competitive, reduce the impact of budget cuts, drive performance improvement and enhance IT value. Surprisingly, there are seven opportunities to achieve these goals that IT often overlooks.

As the economy tightens and corporate leaders seek ways to reduce costs and squeeze more out of organizations, CIOs are in a unique position to seize the opportunity to refocus their IT departments in a way that makes the business more competitive—both in the near term and for years to come. In doing so, savvy CIOs may be able to reduce the impact of budget cuts on IT and, at the same time, drive performance improvement and enhance the value of IT to the overall enterprise.

The top seven opportunities to enhance performance improvement typically overlooked by many IT departments include:

1. Focus on What the Business Wants—and Needs—from IT

What is the IT group’s role in helping the company to achieve its goals? This may not be as straightforward as it seems. When was the last time you seriously thought about the business plan and how IT contributes to reaching the goals of the business? This does not refer to annual planning and budgeting, but rather a serious assessment and discussion of where the company should spend more or less on IT and how that impacts costs, revenues and profits.

The CIO’s ultimate goal is to understand the business with sufficient breadth and depth to make specific and meaningful recommendations to the other CXOs about how IT can help to reach overall business objectives. Spend time with your peers and their direct reports. Spend time observing the way the business actually operates. Then discuss what is required of IT. Is reducing IT costs to free up money for their initiatives really the best answer? Do you both fully understand how IT impacts their function(s) within the business?

2. Balance Your Attention on IT with Your Attention on the Business

Technology is simply table stakes in today’s business environment. A CIO’s strategic value is realized in the ability to recognize and articulate how technology can be used to move the business forward, as well as in leading the improvement initiatives. This requires leadership across the business, not just providing leadership in the technical aspects of a project. Many IT organizations spend entirely too much time making technology decisions—waiting for the business to provide them with “change requests” or “business requirements”—and not enough time figuring out how to use technology to add value. To be relevant to the business, CIOs and IT departments need to think of themselves as responsible for business performance in addition to technology performance.

There is no better way to improve your ability to focus on the needs of the business than increasing your understanding of how the business operates and uses information technology. Many IT managers and CIOs are uninformed about business operations. Even those who have great relationships with other business executives often fail to take the opportunity to roll up their sleeves and observe the details of how the business actually works. Sitting down and watching staff perform their functions and observing tasks that are complex or error-prone are critical to understanding how to truly improve business operations.

3. Prune Your Project and Services Portfolio

This is also a great time to prune your project and services portfolio. Focus on the things that have near-term, concrete benefits, and emphasize projects that deliver real, measurable cost savings in the short term. While it will be painful to mothball strategic projects and it may ultimately cost more money to restart them down the road, it’s best to shut down any project that is not critical to improving the health of the company.

Be prepared to make deeper cuts than you first thought necessary. It is better to be aggressive at the outset when cutting costs, even if you have to include costs later, than to make several rounds of cuts. This exercise will also help you and other business leaders recognize critical elements of business operations and those that are extraneous.

4. Tighten Up Vendor Management

As IT shops find themselves outsourcing more functions, vendor management continues to receive increased attention. The reality is, vendors are probably better at managing you than you are at managing them. Does your favorite vendor always drop what he is doing to respond to your calls and requests? If he never says no or never pushes back on a request, it may be an indication that you have not defined his company’s responsibilities in sufficient detail and it could also be an indicator that you are paying too much. You should be wary if your vendor interprets a contract to the letter and charges you for even the smallest requests.

Successful relationships with vendors require as much time and attention as are required—or more—to manage the same services internally—this cannot be a “hands-off” relationship. Treat your vendor contracts as you would treat internal projects and services. If you are unable to extract measurable business value from the services the vendor is delivering, you should stop paying for those services.

5. Upgrade Your Staff

IT departments often lack developed programs for the growth and enhancement of employees. As IT functions become more integrated into all business operations, it has become critical for IT staff to develop a balance of technical skills, business skills and “people” skills. Review the performance of your staff critically and determine how each member is performing. A performance improvement plan should be developed for those employees who do not meet the needs of the business, and you should determine whether to give employees a chance to improve. If they don’t, it is time to let them go.

6. Lead (Embrace Your Role as a Change Agent)

In most companies, no one is better positioned than the CIO to assume the role of a general to lead change efforts for the organization. You have a unique view of the playing field, as well as myriad tools of change at your disposal—data, technology, process design expertise, etc. If you’ve done your homework, you most likely have solid working relationships with the other CXOs and a business proposition that complements, rather than competes with, their interests. In the modern business world, there is no such thing as a technology problem—all issues contain process, organization, information and technology problems.

7. Sell, Sell, Sell

IT’s contributions to the business may not be obvious to other business leaders. It is the job of the CIO and IT managers to educate them about what IT can and should do. Marketing creates and shapes demand; sales satisfies demand. If you aren’t including both marketing and sales in your efforts, don’t be surprised if the other CXOs misunderstand the IT function.

Unfortunately, the mentality of many IT groups is that they are very busy and prefer not to take on more. While this may be true, it is not a positive way to demonstrate value and partnership with the business. A good IT governance process creates a mechanism for business leaders to understand and make judgments about alternatives and trade-offs.

Efforts to make IT more efficient and effective go far deeper than simply cutting costs. Done poorly, cost cutting can damage both the IT group and the business, and the effects may be very difficult to overcome—even in a more favorable economic climate. To deliver the greatest value, focus on the right initiatives with the right team of people and vendors, and communicate more effectively with your peers. Admittedly, being a CIO is not an easy job, but someone’s got to do it.

Bob Riddell is a senior director and Eric Ullman is a director with Alvarez & Marsal Business Consulting specializing in information technology.