For IT leaders stepping into a new CIO role, laying the groundwork for IT success can be difficult. Shannon Gath, CIO of $3.7B high-tech solutions provider Teradyne, has a playbook for addressing this challenge, and it starts with listening.
“I do a deep dive with my business partners to learn how IT can help them solve their business problems and accelerate them on their journey,” she says. “But once I have that understanding, I need to take action fast to show that we are committed to their, and our, success.”
Structuring IT around stakeholders
After Gath joined Teradyne in April 2021, that action was to restructure the IT organization around stakeholders, rather than technology. “When you are organized around technology, one person has to know the ins and outs of a system, which leaves very little time to spend with business partners thinking about investment opportunities,” she says. “The technology-focused approach forces you to be too honed in on the tactical view, not the strategic.”
By dedicating an IT leader to each of Teradyne’s three business areas — industrial automation, automated test equipment, and corporate functions — Gath not only encourages IT to be more strategic, she also builds her bench. During her career, she has seen several people she has placed in these roles evolve into full CIO roles. “The business-centric organizational structure pays for itself; in addition to setting your current business up for success, the model becomes a platform for developing next-gen talent,” she says.
With her reorg under way, Gath turned to another key lever in creating IT value: governance.
“Sometimes governance is a dirty word, but it is the key to transforming from a cost center to a value center,” says Gath. “Governance is simply a cross-functional team using an objective process to weigh every investment opportunity.”
To make the governance process effective, Gath and her team use the same tracking and communications tools they use in their internal IT operations meetings. “This way everything is reusable and our messaging is consistent, no matter what the forum is,” she says.
IT governance clarifies priorities
In governance meetings, Gath and her peers create a stack ranking of all investment opportunities, “because we need to be crystal clear about the leadership team’s priorities,” she says. “This way, teams who work across multiple projects don’t need to escalate tradeoff decisions to the leadership team. Because they understand the priorities, those teams can make those decisions themselves.”
In companies that do not have a formal governance process, departments that appeal (and complain) the most are the ones that often get the investments, which results in siloed investments and lack of an enterprise mindset. That is why Gath sometimes “ruffles feathers” when, as a new CIO, she puts in a formal governance process.
In one role, she was asked, at the last minute, to present on the status of governance process. “I was put in the hot seat to defend the new model,” she says. “So, I created one slide that described what was working, what wasn’t, and what I am doing about it. People put down their pitchforks because they saw that I didn’t think our new governance model was perfect.”
While a stakeholder-centric IT organizational structure and an effective governance model are foundational to IT value, they are not sufficient. For Gath, IT value comes from her team’s ability to help their business partners create value, and to shift from order takers to true strategic business partners.
Forecasting value and risk
Shifting a team from order takers to business partners is a perennial challenge for CIOs. As such, Gath solicited the help of Gartner’s Tina Nunno, who has developed a list of questions that IT leaders can use to drive for business value.
“A stakeholder will tell the governance body that they need a new technology, because without it, the business will be at risk,” Gath says. “But when you ask questions to drill down on the specific nature of the risk, you might find that the technology is really not about risk; it’s about cost savings. I’ve never worked in a business where creating value statements was easy. It’s hard for every single investment, especially when the investment is risk-oriented. The right questions get everyone to a well-articulated value statement that we can weigh against other investment opportunities for a true apples-to-apples comparison. It’s not hard; it just takes thoughtful questioning.”
Such questions include: “How is this investment supporting your business strategy?” “What risk does this initiative create?” “Are we growing the top line or benefitting the bottom line?” “Is this a ‘try’ or a capability that we’re going to embed into the organization?” Addressing questions like these enables Gath’s leadership team to get to the ultimate question: “What is the value of this initiative and when we can expect it?”
With that final question answered, Gath and her team can put in place another key to IT value: measuring the ROI of initiative after it is implemented.
Measuring IT ROI
Gath’s IT PMO leader is charged with measuring the actual ROI of a technology investment. “We can’t create a business case for an investment that will grow us by $500M and then not measure it on the other side,” she says. “The feedback loop improves the governance process. It makes the business sponsor and the governance process accountable for being realistic about the return on an investment.”
Ultimately, for Gath, the stakeholder-centric organizational design, governance process, and encouraging her team to ask the right questions, are all about one thing: transparency. “In every CIO role I’ve had, one of the biggest obstacles is a lack of transparency around how we are reducing operating costs so that we can free up funding for growth opportunities,” she says. “If we have a strong bottom-up understanding of the spend, when the business asks, ‘Why are you so expensive?’ we can show them.”
Gath’s advice to CIOs looking to build a culture of business partnership is to be accountable, transparent, and objective. “Let them know that you are on their side, because ultimately, we are all in this together.”