Organizations striving to excel at exploiting information technology need to adopt a new IT mindset. Why is a new mindset necessary? As others have noted before, by changing how we look at the world, we can change the world itself. By the same token, by changing how we look at IT, we can change how organizations exploit technology to drive business performance and competitive gains.
What makes the new IT mindset critical is the strategic significance of IT to businesses. Relatively new as a strategic resource, IT is now the best game in town for driving competitive gains. And even if you leave such driving to your competitors, you must at least keep up.The challenge organizations face in adopting a new IT mindset is not so much in creating a new outlook as it is in changing the existing one. Text Despite the current prominence of IT — and to a degree because of it — the business-IT dichotomy is still very much with us. It’s because the reference points are still the same. Those reference points are of the IT organization with its history of peaceful — though not always collaborative or productive — coexistence with the business, and of the business with its own story of dysfunctional relationships with IT.
The challenge organizations face in adopting a new IT mindset is not so much in creating a new outlook as it is in changing the existing one. As has often been noted of existing IT systems and infrastructure, it would be far easier to start from scratch than to innovate within the existing legacy IT investments. The legacy that encumbers us applies equally to our mindsets as it does to outdated systems and applications.
To exploit it as a strategic resource, we need to look at it with a fresh attitude. We have to approach it with the same creativity and objectivity as we approach other resources, not with reverence, fear, or exasperation. It is one thing to declare, “IT is a strategic resource for us”; it is another thing entirely to live by this credo.
WHAT IS THE NEW IT MINDSET? The new IT mindset has three defining characteristics.
1. IT knowledge is a requisite part of business competence.
2. IT investments are the responsibility of business managers.
3. IT and business are not separate concepts or domains.
IT Knowledge Is a Requisite Part of Business Competence
In the new IT mindset, basic business competence requires knowledge of IT trends and IT potential as well as fluency in business-IT terms and concepts. Ignorance about IT is not bliss. Terms like ERP, CRM, B2B, or supply chain automation have to be in the lexicon of every business manager. A good grasp of the strategic and operational value of IT for the industry, the organization, and the functional area is also a must.
Cursory IT literacy is insufficient. IT knowledge has to be assimilated into fundamental business thinking and decision making in a gestalt-like fashion. To be of practical business use, IT knowledge and insight must be synthesized with other kinds of knowledge and insight and incorporated into a manager’s overall business worldview. Devoid of IT, such a worldview will be unsound.
Business fluency in IT does not require the equivalent of a computer science degree. There will be plenty of arcane concepts and terminology still reserved for programmers and other IT specialists. But hiding behind pronouncements like “I’m not a techie” will no longer justify not having a good grasp of available business technologies or not dealing with technology problems as business issues. If your business runs on IT, you’d better know something about it.Cursory IT literacy is insufficient. IT knowledge has to be assimilated into fundamental business thinking and decision making in a gestalt-like fashion. Text The time when an IT manager would patiently and repeatedly explain to a business manager a basic IT concept with far-reaching business implications is over. IT gurus and advisors will always be needed, but not to explain the IT equivalent of why we no longer believe the world to be flat. Business managers need to move on to the next level of understanding and working with IT.
When IT considerations become routine, the natural consequence is also to include them in business strategy making. The practice of deferring, or “taking offline,” IT considerations is completely at odds with the new IT mindset. Such considerations are intertwined with all strategic activities. As a result, there is no need for aligning IT and business strategies. They’re already, by definition, aligned.
An overzealous viewpoint that treats IT with awe and deference should not be confused with business competence in IT. On the contrary, IT has to be demystified and viewed as another, albeit extremely powerful, resource at the business’s disposal. IT competence is not about knee-jerk reactions to trends and fads. It is about constructing a baseline of knowledge that is continually updated with new information, the latest developments, and fresh insights. It is about scanning the horizon for new possibilities while maintaining good business judgment and taking the right risks in IT investments.
Maintaining business competence in IT will prove easier for the new cadres of business managers. IT has not only been a ubiquitous and unavoidable part of their upbringing, but it is also a prominent component of their business schooling and curricula. This was not the case for the typical manager of the 1980s or the early to mid-1990s, who did not receive much instruction on how to compete in an information age. Yet it is mostly those managers who now populate executive and high-level managerial positions, whether in business or IT. It is also their mindsets about IT that continue to dictate most organizations’ attitudes about IT in general and the corresponding decision making in the context of their business.
Because the IT world is evolving at a rapid pace, keeping up with new technology developments will be more challenging for a business manager than keeping up with concepts and trends in other business management disciplines. But it is precisely that instability and the degree and speed of innovation that make IT such a formidable weapon — whether for businesses that use it or for those that end up as its intended or unintended targets.
IT Investments Are the Responsibility of Business Managers
The second defining characteristic of the new IT mindset emphasizes that ownership of technology use and investments belongs with business managers. As with any other business resource, those responsible for business performance and bottom-line results should also be responsible — and accountable — for investments in IT. Some exceptions will apply to IT infrastructure and support investments funded by the overall IT organization. But even those investments will have their business cases, and the IT budget can be traced down to individual business unit contributors.
Too often, there is a de facto separation of the responsibility for decisions to invest in IT and the responsibility for the outcomes of those investments. Conceptually, the two are generally lumped together; in practice, they are hardly connected. While funding and go-ahead decisions are typically reserved for steering committees and sponsoring business-area managers, the responsibility for outcomes is explicitly or implicitly handed off to the IT organization and the IT manager. In the new IT mindset, the responsibility for IT decisions as well as IT outcomes rests with business management.
Such merging of responsibilities for decisions and outcomes can have a very sobering effect on business managers. Investing in IT is no longer a game of asking the IT department for the world without giving much thought to costs or tradeoffs. Those responsible for planning and results tend to employ a different discipline than those responsible for planning only. Now having to deliver on their own decisions, managers will see to it that the decisions themselves are pragmatic and realistic.
IT investments by themselves accomplish little. They take on significance only in the context of how the new technology is utilized by the business, how it impacts its competitiveness, and how it enables or transforms the surrounding processes and activities. They take on business meaning — beyond that of a sunk cost — through the benefits (or losses) they create. Only those with the corresponding business responsibility tend to have the full grasp of that context.
The new IT mindset presents IT investments within the entire portfolio of business investments and business choices. This is a markedly different view from that of a portfolio of all IT, and only IT, investments. The IT portfolio view is needed to promote overall IT architectural fit and soundness, but an overemphasis on the IT systems portfolio can take it out of the overall business context. IT investments need to be viewed side by side — ideally, embedded into — business investments and options.
IT managers have traditionally benefited from viewing IT projects in the context of business initiatives. These managers’ interpretations of and buy-in into business decisions can shift dramatically when IT investments are viewed through the eyes of those who run the business. Conversely, the perspective from which business managers view IT projects influences their decisions about IT investments. Cost cutting from a comprehensive list of ongoing IT projects demands a different mindset than going through a list of current business initiatives that have the IT investments embedded into their costs and benefits. The first mindset views IT as a cost center, the second as a value creator. There are times when preserving cash is a business’s highest priority, and scaling down or stopping IT projects is indeed the right decision. But such decisions benefit when they are informed by the broader business context.
Organizations that have adopted the integrative business-IT organizational model benefit from close collaboration between the IT organization and the rest of the business. Although the integrative model is characterized by partnership and a keen focus on driving business results through IT, it cannot reach its optimal potential unless business managers internalize IT as a business resource and IT investments as their responsibility. The most fertile ground for innovative uses of technology is close to the everyday business insight. No matter how well intentioned and aware of the business environment it is, the IT organization by itself can yield only modest results. Business managers’ initiative and sense of ownership are key to maximizing them.
In the 1990s, it was IT leaders and IT managers who, by working more closely with business areas than ever before, gradually filled the IT business leadership vacuum and took on much of the responsibility for IT investments and innovation. This was a valid interim approach, as it afforded the time needed for the new IT mindset to take root in the entire organization, not just within the ranks of the IT department. Unfortunately, it has also lessened the urgency for business managers to learn to exploit IT. After all, someone else was responsible for technology, and someone else could take not only the credit, but also the blame.
At the same time, having IT managers take the lead in the strategic use of IT often backfired. Unless there was a relationship of trust between IT and non-IT managers, the latter looked with suspicion on IT’s attempts to shape business strategy and often felt that IT managers were encroaching on their territory. Non-IT managers eyed skeptically IT’s enthusiastic, and often impatient, proposals for bold business applications of information technology. Many thought the proposals naive and unrealistic — often for good reasons. But most non-IT managers at the time lacked the requisite IT knowledge to entertain or evaluate such proposals.
The resulting dilution of responsibility for IT investments now seems prevalent in many organizations. Management by committee, whether through steering committees or co-responsibility between the sponsoring business area and the IT organization, has useful elements but is by itself deficient. Someone somewhere needs to be on the hook for each IT investment and must have the authority to ensure that it delivers value. And that someone had better report to — or be — the person with bottom-line responsibility for the business area deriving direct benefits from the investment.
IT and Business Are Not Separate Concepts or Domains
The division between the IT organization and the business it serves has been a long-standing tradition. Ironically, even when decrying “the chasm” between the business and IT, we still use language and symbols that perpetuate this separation.
Just think of regular conversations where “the business” means all of the business except IT, and “IT” means technology or the IT organization but not the rest of the business. An innocent question like “Who’s running this project, business or IT?” reveals the organizational separation between the two groups; you’re either on one side or the other, never both. “Is this a business or IT problem?” is an even more revealing question. Is an IT problem not a business problem? The new IT mindset erases much of the conceptual and cultural separation of business and IT.
Consider the typical process for evaluating a software package, in which the organization groups the attributes to be assessed into two categories: business related and technology related. A business representative evaluates areas such as functionality, features, and price, while an IT representative evaluates areas such as scalability, architecture, and maintainability. The two have different perspectives and priorities. The two also tacitly assume that the set of attributes from the other category is someone else’s problem. When there is disagreement about the favored solution, the area with the most clout wins.
What rarely surfaces in this process is the realization that a business-related deficiency is an IT problem, and vice versa. A functionally deficient package will likely require frequent updates and customizations on the part of IT. A technologically inferior package will likely introduce significant costs not only in additional maintenance by the IT organization but also in lost business flexibility, lost business productivity, and lost customer or supplier goodwill (or just plain lost customers and suppliers). There is nothing wrong with delegating the pieces of the evaluation to different individuals, but these pieces have to converge into one business decision. Both functional and technological deficiencies have real costs that must be anticipated and accounted for in the final analysis.
THE THREE “I’S” OF IT INVESTMENTS
IT investments come into existence and deliver results through three primary sets of activities: innovation, implementation, and integration. All three have to be attended to for organizations to capitalize on the business potential of IT. Each set of activities represents a different perspective, complementary to the other two.
IT Innovation
It is not the goal of this article to add to the general discussion on the finer points of what does and does not constitute innovation in businesses. The quick-and-dirty definition adopted here is as follows: if it is new to the organization and, in principle, attempts to advance the business, it is innovation. Business-IT innovation is thus about applying information technology to advance the business. It can range from bold moves like eliminating a sales channel with direct, Internet-based customer access to simple ideas like eliminating a screen in a new application to streamline a process.
The practice of separating out a central IT function chartered with scanning the technology landscape, spotting promising technologies, and attempting to innovate on a small and then larger scale has its benefits and should not be discontinued — particularly in the context of spotting threats and opportunities that might otherwise be ignored in the near-term outlook of business managers. But this group does not take over from the rest of the organization the responsibility to innovate through information technology. Business managers must be cognizant of the implications for their business of new and existing technologies. It is their responsibility to seek opportunities for combining those technologies with their organization’s special business capabilities in unique ways that differentiate them from competitors. This sort of innovation requires creativity, business and technology insight, experimentation, and agility. Business managers should never view IT innovation as someone else’s job.
IT Implementation
IT implementation encompasses the well-recognized IT project lifecycle activities: planning the project; putting a technology team together; designing, building/adopting, and deploying a solution; communicating with other project stakeholders; and often delivering documentation and training. In short, this perspective delivers the technology solution and puts it into place.
Aside from IT infrastructure management and support, IT implementation is what the IT organization’s track record consists of. Indeed, because the IT organization has owned the technology domain for decades, implementation typically constitutes the entire organization’s history in the exploitation of IT. IT implementation is the area with established processes and numerous accepted, though ever-evolving, best practices and methodologies.
The focus of implementation is to define and then meet project specifications. It is rarely to deliver measurable value. Meeting the specifications and delivering value are not always synonymous. When the principal measure of success is user acceptance of a deliverable produced on time and within budget, no wonder a high percentage of completed IT projects fall short of business expectations.
Passing user acceptance and meeting the deadline are, of course, good things. Many projects don’t get that far. The problem does not lie with the traditional implementation process but with a business leadership vacuum in the area of maximizing value from IT investments and managing organizational change around them, as opposed to scope and task management. Although some business-focused IT managers have proven that there are exceptions to the rule, in general a technically oriented IT manager is not the right candidate to fill this gap. This is where the third perspective, IT integration, comes into play.
IT Integration
IT investments are by definition part of larger business initiatives. IT integration deals with the larger business picture, of which delivery of the technology product is only one part, albeit a very important one. If the initiative is a new IT-based product or service, product management and the associated activities must take place. If the initiative is to improve efficiency, process redesign and change management will accompany the project. The integration perspective ensures that the entire package is optimal and of value to the business.
The IT-integration perspective is also one that has historically been overlooked. The typical IT-integration perspective in businesses starts and ends with the business case developed prior to starting the initiative. Once you justify it and get the funding, off you go with implementation. Rarely does anyone look back at the business case to assess whether progress to date still supports it. In the new IT mindset, the IT-integration perspective ensures that initial business cases, feasibility studies, and need definitions are produced and evaluated. However, its even more important contribution is to ensure on an ongoing basis that the project does indeed deliver value — or is scrapped before it wastes more time and resources.
Devising and applying appropriate business metrics for the overall initiative goes beyond the software quality and acceptance testing that are generally associated with IT implementations. IT integration is where all of the business benefits and costs (including the cost of capital) are measured before, as well as long after, the IT investment is put into place. The investment has to continue to make business sense at all of the checkpoints. Plus, new value-creating opportunities may be spotted, such as by leveraging the same investment in other business areas.
The IT-integration perspective continually attempts to answer not only the question “Are we on track?” but also “Are we on the right track?” The goal is to maximize and measure value, not just to declare victory because a project has been completed.
Tying the Three Perspectives Together
The shortcomings of a pure IT-implementation focus should not lead to the conclusion that IT implementation is no longer important. Rather than reduce their focus on IT implementation, which remains critical to project outcomes, organizations should complement it with a clear spotlight on IT innovation as well as IT integration. All three perspectives are necessary to succeed in exploiting IT.
In the context of a specific IT-based initiative, the activities of each of the three perspectives will have a tendency to cluster around specific lifecycle stages. The three “I’s,” however, should not be viewed as sequential phases in the lifecycle of a project. They are parallel and complementary and require continuous collaboration.
Business-IT innovation does not end with the inception of an idea that is handed off for implementation. Continuous calibration and innovation throughout the project — from identifying an additional market segment to be targeted with the new system to devising details of an optimal process or user interface — help ensure the best possible solution. Implementation considerations (for example, “the technology is not ready for this idea”) can invalidate an otherwise good idea before it takes off and unnecessarily consumes resources. Similarly, if a revenue-generating idea is just not going to fly with the customer or the sales force, the integration perspective will either scrap it or factor in the additional costs that diminish the investment’s value.
While IT organizations have their limitations, blaming the IT group for unsuccessful use of IT in business is generally misplaced. The problem is not that the IT group has not excelled at IT innovation, implementation, or integration. The problem is that the business hasn’t. It takes both domains to make it work.
Special Role of IT Integration
While all three perspectives are essential to capitalizing on the use of IT, the IT-integration perspective naturally emerges as the key one. Once a project is initiated, innovation and implementation perspectives are frequently at odds with each other. For example, many projects struggle with whether to proceed with additional functionality (innovation) at the expense of extending the schedule and increasing the costs (implementation). A healthy integration perspective will resolve such issues based on realistic estimates of costs, benefits, constraints, and the resultant value.
The IT-integration role should not be confused with the traditional project administrator function that typically reports to the IT-implementation manager, has no direct decision-making authority, and lacks much depth in technology or business knowledge. Indeed, the opposite will be true of an effective IT-integration manager. Neither is the integration role about the corporate audit function, application of best practices across IT projects, or a detached, executive-level oversight focused on high-level status and issues reporting. Instead, this role is about close participation in and monitoring of the initiative to ensure — day in and day out — that business value gets delivered from the investment and that the work is directed accordingly.
Who can fill the role of a manager of IT integration? The successful candidate will be a business manager first and a technologist second, whose incentives will be closely aligned with delivering value from the IT investment. Intimate knowledge of the business, fluency in finance, project management skills and experience, and general technological competence are all required. This is a tall order that many organizations will not be ready to fill with available talent. But recognizing the need will be the first step in developing that talent.
HOW TO CREATE THE NEW IT MINDSET
The new IT mindset has little to do with technology itself. Instead, it is primarily about organizational culture. And, like all cultural changes, it requires vision, leadership, reinforcing mechanisms, and time.
It All Starts at the Top
Step one is for you, the leader, to adopt the new IT mindset discussed above. The next step is to craft a vision of what the new IT mindset means to your organization and how your organization will benefit and be transformed by it. The vision will define the desired state that will stretch and challenge the organization. Crafting of the vision can be done by the management team, including IT leadership. But it should never be delegated solely to your IT leader — that would be the old IT mindset.
Finally, communicate the vision. Then communicate again, and again. Start out with a formal pronouncement, then reaffirm the message on a regular basis in formal and informal settings. The message should be coming from the management team. Again, it should not turn into an evangelizing exercise led by the IT organization. If the troops sense a feeble message from the top, they themselves are unlikely to subscribe to it.
Set Up Structures and Processes
Adjusting formal organizational structures and processes will reinforce your vision and help put it into action. With the accountability for IT investments now assigned to business managers, processes as well as roles and responsibilities on IT projects will change. They will support the three perspectives of IT investments: innovation, implementation, and integration.
Of the three, innovation will likely require the most nurturing, yet at the same time will defy structured processes. Once the right people are in place, however, spurring business innovation in IT has more to do with eliminating roadblocks than with managing innovation itself. Bureaucratic procedures, limited access to outside resources, limited decision-making authority, and a culture that punishes failure are examples of such roadblocks….the responsibility for business-IT innovation should not rest with a select few but should be the responsibility of the entire organization.Text Risks of excessive and consistently fruitless innovation are mitigated by the ownership of the investments — in terms of funding, costs, and benefits — by business managers. With the incentives appropriately aligned, the rational behavior will be to maximize value from IT, not to maximize the investments themselves or indulge in experimentation for its own sake. The basic premise is: “If you can demonstrate and deliver value, go for it.” However, the responsibility for business-IT innovation should not rest with a select few but should be the responsibility of the entire organization. Anyone from an end user to a line manager to a chief strategist should be allowed and encouraged to improve the business through IT.
The structure and processes for the three perspectives will be tailored to each organization’s needs and capabilities as well as to the specific requirements of the business initiative at hand. On newly started initiatives, one simple approach may be to delegate the management of each aspect to a different leader, with all reporting to the overall project manager (who may be the project’s ultimate sponsor or be reporting to the sponsor). Alternatively, because the integration perspective sees to it that value be delivered from the investment, its leader may also be the natural candidate to oversee the project’s innovation and implementation aspects, with innovation and implementation managers reporting to that manager.
In the case of an IT investment that supports a variety of initiatives from different business areas, there will be one IT-implementation lead and a number of IT-integration leads, one from each of the business areas funding the project. In yet another scenario, one IT-integration manager would represent all of the business areas to ensure optimal cross-area benefits, consistency, or efficiency. Roles can be combined and specialties developed across projects, as long as the incentives for fulfilling the requirements of each of the three perspectives are appropriately aligned.
The IT Organization
What is the role of the IT organization in the new IT mindset? The ownership of IT investments by business managers does not eliminate the need for an IT organization. Rather, it amplifies it. The IT organization, however, is no longer a monopolistic grantor of IT services or a passive order taker. It is a trusted and knowledgeable partner with the rest of the business, assisting it in capitalizing on creative uses of IT.
Particularly in the early stages of adopting the new IT mindset, businesses will have to be closely guided in technology areas such as architectures, standards, and security. Neither the immediate well-being of the enterprise nor its long-term strategic capabilities should be compromised by transferring complete control of technology decisions to business managers. Some of that control will have to be retained by the overall IT organization. To what degree is a question for which every business must provide its own answer. With the switch to network and Internet-based architectures, issues of data security and privacy, systems availability and reliability, and branding and public image must be addressed from an organization-wide perspective. The organization’s IT and information assets must be guarded by those best suited for the job — the IT organization.
Get the Right People
If IT knowledge is to be treated as a component of basic business competence, then it must be included as a criterion in hiring, promotion, and performance-evaluation decisions. The requirement for IT knowledge and insight may be satisfied through hiring, position reassignments, education, or any combination of these.
IT gurus, specialists, and generalists will still be needed. How does a business manager stay on top of the arcane and tumultuous IT landscape without making it a full-time job? By being surrounded by good sources of information. One significant source is an IT business advisor. In addition to having an excellent grasp of IT trends and developments, an IT business advisor possesses solid business knowledge and communication skills to make sense of it all within the business context. IT business advisors seek opportunities to share their knowledge with those who have direct business-performance responsibilities.
Evaluate and Calibrate
It is hard to measure a mindset. What can and should be measured, however, are the outcomes it produces. Assessing value from individual investments as well as trends across such investments provides a key, albeit indirect, measure of progress. Standard financial measures such as economic value added (EVA), discounted cash flow, or just plain ROI will obviously apply. They will be particularly powerful when the same standard measures already practiced by the business are also employed for evaluating IT investments.
Well-designed and well-implemented surveys of customers, suppliers, and employees are another tool for assessing value from IT investments. Has the investment made work easier? More effective? More efficient? Do customers find the experience of dealing with your organization better? In what ways? Have you gained customers because of the investment?
Note that unless the investment enables a new product or business line, the last question cannot be answered with complete precision, as it is difficult to ascribe definite numbers of gained (or lost) customers to a specific investment. The same difficulty applies to quantifying new revenues or increased market share by directly attributing them to the initiative. But those who have business insight and are close to the area in which you are expecting benefits may be able to provide enough of an answer. Anecdotal evidence often reveals volumes.
Walk the Talk
Leading by example is still a powerful reinforcer. Here are some examples:
