The role of business strategist is not a new one to the CIO. Many CIOs have become adept at applying their new people skills and entrepreneurial spirit to their IT initiatives. And with the burgeoning electronic economy, CIOs may have the edge over other executives in their organizations when it comes to leading their companies’ business strategies toward the online Mecca.
“CIOs and CTOs are well-positioned, because of their management expertise and their core competency, but also because they understand the very catalyst for the changes themselves — the technology, the communications infrastructure,” said Duncan Card at a CIO panel discussion at November’s CIO Summit in Toronto. Card is partner in the information technology law practice group of Toronto law firm Davies, Ward & Beck.
However, despite the CIO’s new-found prominence within his or her organization, there is still a hurdle to overcome: meeting the expectations of the CEO. Panel participants offered up some suggestions for determining what senior management’s expectations are, and for defining appropriate evaluation criteria to demonstrate that those expectations are being met.
Mackenzie Financial Corp.’s CIO, Stephen Pozgaj, uses a tool called the “IT delivery triangle”, which encompasses three elements: alignment of IT with the business to maximize value; IT execution in terms of technology organization and process; and measurement of IT value. It’s important to measure the results of IT execution in the business unit against organizational goals in the language of the business, Pozgaj pointed out.
“We don’t measure in terms of ‘we’ve added these many MIPS’. We measure in terms of ‘we’ve increased customer retention by 40 per cent,’ because that’s meaningful to the business,” he said.
Using an IT alignment framework developed by analyst Chip Gliedman of Giga Information Group in Santa Clara, Calif., Pozgaj illustrated how IT executives can determine what role IT has in the organization, what expectations are placed on IT and how its effectiveness can be measured. The framework is divided into four quadrants, with IT’s impact on business operations measured against its impact on business strategy.
In the lower left quadrant, IT fulfils a custodial role, probably in a back-office type of environment, where expectations of IT’s contribution to the business are low. Moving up the operational impact axis, in a factory scenario IT moves into more of a supporting player role, where it is essential to operations but has little impact on business strategy. IT projects that have little impact on operations but are key to business change can potentially have a turnaround effect on business strategy. Quick, effective project delivery is essential in this lower right quadrant of the framework. The fourth and most esteemed quadrant is the top right, where IT is tightly integrated with business and essential to a company’s growth. When IT takes on this strategic role, it becomes a partner in the business’s leadership.
In terms of meeting expectations, Pozgaj said each IT role has different criteria for measuring its worth. IT cast in a custodial role will be measured on efficiency, taking into account costs, expenses and defects. IT in a supporting role is measured on its effectiveness, where user satisfaction, ROI and service quality are the determining factors. When IT finds itself in a leadership role, its worth is defined by its business applicability, and the metrics include customer service and retention, time to market, and new revenue stream generation.
The key thing to remember, Pozgaj said, is that CIOs need to define critical success factors in order to determine if they have succeeded in their goals. “You’d be very surprised how many people start off on major projects without any idea how to answer this question: if we are wildly successful, how will we know?”
To be able to communicate success points along the way, CIOs must obtain feedback from the various stakeholders affected by any given IT project.
Another helpful tool for measuring IT’s value to the business is Giga Information Group’s Total Economic Impact (TEI) measurement model, according to Pozgaj. TEI goes a step beyond Gartner Group’s Total Cost of Ownership (TCO) model, to not only measure the costs of implementing and maintaining technology, but also the benefits and risks associated with IT changes.
THREE-STEP ALIGNMENT PROCESS
Stephen Thompson, senior vice-president and CIO of information systems and trading services for the Toronto Stock Exchange, offered these words of advice: “From an IT perspective, we must step back and indicate to our CEO partner and line-of-business partners that we are really there to enable the business strategy.”
IT alignment with business strategy is a three-step process, Thompson said. Alignment must take place not only at the planning and funding stages, but also through ongoing coordination. The senior business and IT managers need to share a common set of goals, and be able to communicate their vision down the ladder to the operational managers who fulfil the vision.
Customer satisfaction is one objective where the CEO and CIO need to closely align their activities and enthusiasm, according to Thompson. “If we are not, as CIOs, focused on the complete satisfaction of our line-of-business partners as we move to enable the business strategy, we are missing a key point.”
In order to gain the confidence and trust of the CEO and senior management team, CIOs must not only deliver bottom-line value to their companies, but they also need to demonstrate they are delivering that value, advised Mike Cuddy, CIO and general manager of information technology at Toromont Industries Ltd. That requires creating the right perception. “The assessment of IT management performance is largely anecdotally based, and I think too often CIOs ignore that,” he added.
To address the perception issue, CIOs have to figure out who influences their destiny and funding and other key resources they need. Although the CEO is usually the main influencer in the business, the CIO also needs to look at who influences the CEO. It could be the senior management group, or perhaps an external advisor or consultant. Understanding how these people assess the value of IT will help the CIO determine what the CEO’s attitude toward and expectations of IT are, said Cuddy.
In other words, meeting the CEO’s expectations is largely about managing perceptions toward IT. CIOs need to establish a dialogue with their CEOs, continually asking questions about what value the CEO expects IT to deliver. That will set the stage for CIOs to address any idealistic notions senior management may have about IT’s potential, and to steer thinking toward more realistic goals.
Managing the CEO’s expectations first requires getting his or her attention, said Henry Rodrigues, president of the personal lines division of insurance company Lombard Canada. That means developing trust relationships with the CEO and other business leaders in the company. The CIO needs to be seen as an ally and partner of senior non-IT management, Rodrigues said, because those managers are also under pressure and would love to have a comrade in arms who understands technology and how it can enable the business.
“It’s only when you get in there amidst the fray and chaos of business that you tend to have an impact, because it’s very difficult for the CEO and the other business leaders to be able to articulate clearly how technology can be used,” Rodrigues said.
Linda Stuart is a veteran technology writer and associate editor of CIO Canada.