5 Tips on IT Alignment That Can Generate Profit

IT alignment, if done properly, is the CIO’s primary tool for creating value strategically in the company, that is, creating significant new profit or increases in the size of your customer base or improvements in your brand. Almost always, increases in value are eventually measured in terms of increased profits. (Also read The ROI of Alignment.)

Most CIOs do not properly understand the purpose or process of IT alignment and could use a little help in better refining their understanding of what it is and what it can do for them.

The CIO has two primary tools to guide the process of building strategic business value in the company. The first of these is IT alignment; the second is IT governance. To properly understand the focus and agenda of an effective CIO, you need to understand the basics of these two tools.

What Is IT Alignment?

First of all, it is worth noting that many IT directors and CIOs think they are doing IT alignment—but most of them are not because they really don’t understand what IT alignment is. Many wrongly think that because they have business justifications for each of the projects in their IT projects portfolio, they are aligned. This common misunderstanding of IT alignment defeats the ability to use IT as a strategic competitive lever. Properly understood, IT alignment is the optimum (or near optimum) use of IT to build business value strategically. If the CIO selects the IT projects to be developed based on service requests from the business units, then two things can be virtually guaranteed—and both of these are inconsistent with the objectives of IT alignment. First is that IT is being reactive, versus proactive, in responding to initiatives created by the business units. Second, the business units’ requests will not necessarily produce value for the overall business, as most of these requests arise from self-focused tactical needs and not strategic opportunities. (also read Why Is Business-IT Alignment So Difficult?.)

Proper IT alignment requires five steps:

• Step one requires the strategic goals of the organization to be developed and documented by the executive team. (Note: Goals that are not specific, measurable, strategic and written don’t count.)
• Step two is to collect (or mutually develop) a list of the initiatives being implemented or proposed by the other CXOs to accomplish those strategic goals.
• The third step requires the CIO to sponsor brainstorming sessions to identify as yet unidentified ways in which IT could contribute more strategically to the identified strategic goals and other business initiatives from steps one and two.
• Step four is to collectively prioritize these new previously unidentified opportunities and plan to resource them accordingly.
• The fifth step is to plan for the post-implementation audit of these new projects, determining metrics and the schedules on which they will be collected, as well as their success and failure criteria.

Let’s consider the reasons for each of the above five steps.

1. Get a written list of the company’s strategic business goals

This will help the entire company focus on the same specific strategic business goals. A strategic business goal might be something like “Increase our market share by 2 percent over the next 12 months” or “Open up a new market in the Pacific Rim of at least $50 million in sales in the next 18 months” or “Increase sales by 15 percent annually for the next three years.” Since having too many goals will hamper the ability of the company to prioritize its resources and focus its efforts for maximum value creation, a company usually focuses on between one and five strategic goals. In many midsize and smaller companies, specific written strategic goals don’t exist except as vague notions in the head of the CEO. In those cases, the onus falls on the CIO to work with the senior leadership team to create that list. In larger corporations, because good IT alignment is strategically important, often times the CEO looks to the CIO to take the lead in working with the executive team to develop the strategic goals. This list then becomes the target that the entire senior leadership team focuses on for the next 12 to 24 months.

2. Get a list of initiatives being proposed by all other CXOs to accomplish the company’s strategic business goals

This ensures that IT resources will be integrated into the strategic initiatives arising from all quarters of the company. This ensures that IT resources will be targeted to provide effective leverage to the strategic efforts sponsored by the other CXOs.

3. Brainstorm to find hidden opportunities for IT to help accomplish those goals and initiatives

This assures that IT resources will be deployed proactively and strategically. Creative-thinking groups need to identify employee roles that need to exist but currently do not—or to identify current roles that should no longer exist. From this dialogue, strategic business initiatives of business units can be determined and new ways can be identified in which IT could contribute to overall strategic goals.

4. Prioritize new IT opportunities and plan for redeployment

This helps ensure that IT resources will be deployed optimally. It also helps eliminate the trap of expending IT resources against only tactical business needs, as redeployment of IT resources from tactical projects is often part of how these strategic projects get resourced.

5. Plan for post-project audits

This provides accountability up front. This audit plan will show who will be collecting what metrics when and what the success and failure criteria will be based on these metrics. It also provides a process that will improve future efforts in aligning IT resources.

For IT alignment to be truly successful, the CIO needs to get the other C-level executives to help identify and think through the opportunities for strategic value creation that can come from using IT as a strategic catalyst. This will increase the effectiveness of the identified strategic business initiatives. (Also read Peer to Peer – A Formula for IT Alignment.)

A Short Word on IT Governance

As the CIO involves the other CXOs in the identification of strategic business goals and a plan for how to use IT as a strategic lever to help achieve those goals, then he or she is involved in “IT governance.” Sharing ownership of IT as a strategic resource can be a very political but rational process. It requires the CIO to work with each executive to enhance that particular CXO’s ability to perform his role.

CXOs are very busy. The CIO will be able to engage their substantial participation in this process only if they can see how participating in the process will improve their own performance of their roles. The communication of this opportunity, and the fulfillment of this promise, is part of the CIO’s role. The CIO can “sell” IT governance on the merits of step two of the IT alignment process. Essentially, she is saying, “If you participate in the IT governance process, IT can provide strategic leverage for the success of your strategic business initiatives. We’ll help you be a hero! If you don’t participate, then IT will be unable to help you succeed.”

If IT governance is done properly, it becomes indistinguishable from the IT alignment process. Nevertheless, the CIO is well served by remembering that these are two separate processes. Otherwise, the strengths of a good IT alignment process get lost in the politics of the IT governance process. The CIO needs to keep the other CXOs focused on the merits of conducting good strategic IT alignment. In this way, IT alignment becomes the framework for the IT governance process—and providing strategic competitive leverage becomes the primary identifying characteristic of IT in the company.

Richard L. Routh is the director of the Institute for CIO Excellence and full-time faculty at the University of South Carolina Upstate in the Department of Informatics.