Tackling Discord

One of the most perverse aspects of human nature is that no matter how desirable an outcome, no matter how deplorable the status quo, significant numbers of people always resist change. CEOs who attempt to eliminate the disconnect will find a number of forces arrayed in its defense. 

Resistance to change is so predictable that some far-sighted organizations actually offer seminars that teach employees how to deal with resistance. The idea is that if resistance is such a natural process and so predictable, we should

acknowledge it, look at it boldly and learn from it. Why not recognize the obvious? It’s impossible to be constructive about issues no one can even acknowledge. Besides, the reasons people give for resisting are often valid. Employees can contribute to the overall success of the change program by talking about the things that concern them.

The job of the CEO is to build coalitions. CEOs in other parts of the world do this much better than the average American CEO. The Japanese CEO, for example, recognizes that the corporation is a political institution. We shy away from that perspective in America. We call it ‘playing politics’ and think of it as somehow tainted.

American executives would do well to consider politics the art of influencing their colleagues in the organization. “When an organization faces complex decisions, politics becomes instrumental because of the relationship between the positions and agendas of different people,” says Peter Burris, Director, Worldwide Commercial Systems Research, International Data Corp, Framingham, Massachusetts. “Organizations are in place to minimize the impacts and the risks associated with the failure of any single decision. Politics are in place to ensure that information is made available to the decision-making process and that a consensus can be built where it should be built in a way that reflects the overall stakes of the decision to be made.”

The CIO also has a political role to play. Managing the communications highways that enable the connected organization becomes a deeply political responsibility. Computer technology has flattened the organization, eliminating layers and bringing executives and workers closer together. Computer technology has facilitated communication across functional and hierarchical boundaries previously closed to easy communication. It has made it easier to bring together physically remote individuals who have similar expertise. It’s also made it easier to mold individuals with dissimilar expertise into effective decision-making teams. All these factors promote organizations that can align IT with strategic corporate goals.

Aligning business and information technology strategy 



Over the past three years, numerous surveys and studies of executive managers have been consistent in one dimension. The number one issue for both CEOs and CIOs is how to align the company’s information systems strategy with its business strategy. As recently as 1989, according to the Index Group, this issue didn’t even make the top five issues of concern to CEOs. But today, executives on both sides of the aisle rightfully have an almost physical sense that the importance of this strategic alignment supersedes practically everything else if they are to utilize IT to maximum effectiveness. IT professionals have frequently been criticized for being massively indifferent to the market forces that drive the businesses that employ them. This accusation was especially true back in the 1960s and 1970s, when centralized mainframes, with their attendant elite group of programmers and systems analysts who were often more interested in the computer than in the organization, dominated many firms. In today’s competitive environment, no organization can afford such an indulgence.

To their credit, IT professionals now appear to have recognized this unforgiving fact, and have become more focused on their businesses. The emphasis on the internet indicates that many firms are actively connecting information systems more closely with the business.

It is beyond the scope of this book to map how organizations can mesh IT initiatives and strategic operational plans. Nevertheless, it is useful for CEOs and CIOs alike to consider the merits of redefining the way IT plans are formulated.

If your business is typical, the business plan comes first, followed by the IT plan. But there are definite advantages to developing the business plans and IT plans concurrently. A number of information-intensive industries,

acknowledging the centrality of their information resources to their businesses, have found that by developing these plans simultaneously, they can achieve much tighter integration of IT into the core requirements of the organization.

Realignment



Many senior executives have fundamentally lost faith in the ability of IT to offer a durable competitive edge. It’s not because today’s technology isn’t powerful enough. We have more technology than we know what to do with. There is so much power and functionality in the technology available today that most of it is not used to capacity. It’s not because of the incompetence of the people hired for the care and feeding
of computers. In fact, they have done a superb job in building ultra-reliable machines and systems. The loss of faith is a result of the disconnect between the people running businesses and the

technologists.

The Information Age imposes new realities on business organizations. The old ways of doing business, which assumed a constant, predictable environment, simply don’t work anymore. In addition, the processes involved in producing or delivering goods and services have become increasingly complicated.

Managing these processes, especially in a constantly changing and unpredictable environment, tests even the best decision-making teams.



In today’s brutal economic environment, any division between an enterprise’s executive and technical staffs is too costly. Strategic planning to meet the demands of the global, time-compressed economy is impossible without pioneering IT initiatives tightly aligned with business goals. Success requires maximum cooperation and understanding between CEOs and
CIOs.

Fortunately, as I have personally witnessed, an increasing number of CEOs and CIOs are taking positive steps to bridge the gap between their staffs.



The best way to bridge the gap is for the representatives of executive and IT management to start with zero-based thinking. Look at the partnership and its activities. For each activity, ask the following questions:

• Does this activity have value?

• How does it affect our clients and what they are asking us to do for them?

• Why are we doing it?

• If we stop doing it, what will happen?

• Should we be doing something else instead?

In other words, the partnership between CEOs and CIOs must be completely renegotiated. If the relationship between CEOs and CIOs is to be transformed, both sides will have to reexamine every assumption, every behavior and every practice defended by tradition and common sense in the light of whether these practices support the desired outcome. Some people call the process I have just described business process reengineering. 

When you continually reinvent your processes, people and technology, there is little or no need for the expense and upheaval that the largely failed activity called business process reengineering exacts. We ask these questions, not annually or every several years, but continually. The answers might mean that we have to change what we’re doing or how we’re doing it, but we’re not afraid to make those changes and do it quickly.

I consider it obvious that the CEO has ultimate responsibility for eliminating the disconnect between the corporate and technical management of the company. It can be no other way because the chief executive, by definition, has ultimate responsibility for everything connected with the enterprise. That said, the responsibility for combating the disconnect must be personally accepted by everyone in corporate and technical management.

Foundations for realignment



We are witness to an immense shake-up transforming corporate America. Organizations in the last years of the twentieth century
are refocusing their efforts around access to information. Until a few years ago, most centralized organizations relied on research and development and marketing to stimulate growth. Today, with the increasing emphasis on decentralized business units and the rate of technological change in our global economy, technology and information have become as critical as R&D and marketing as keys to future success. Companies that thrive and survive in our global marketplace will be information-based. Millions of dollars, including the survival of the company, are on the line to a much more intense degree than ever before. Without accurate data, companies are more at risk for every decision that must be made.

For at least the last ten years, senior business and information systems executives have struggled with how to bring IT and business into closer alignment. As business needs multiplied and the gap widened between the solutions IT offered and the business challenges facing managers, enlightened representatives of both camps redoubled their commitment to ending the disconnect. The ideal they have been striving toward is an alignment strategy that will optimize the provision of IT and service to the user community. 

The focus of information systems has changed from automating internal processes to enabling multifaceted mechanisms for directly delivering products or services to the customer. The increased complexity of these systems is compounded by the fact that many are used for competitive advantage, giving them life-or-death urgency. The central argument now becomes how to organize IT to achieve higher levels of competitive advantage.

With today’s shorter product cycles, the old IT culture leads inevitably to large development backlogs and missed delivery targets. Corporate efforts to hold down total IT costs are also symptomatic of the old mentality and can be problematic, given strenuous business unit competition for available,

sometimes even scarce, IT resources.

Notwithstanding a greater melding of IT and business units, alignment efforts must maintain professional IT work and systems standards and allow IT professionals practical career options. If you can offer opportunity and technology together, you have a better chance of identifying

competitive-advantage systems.

Companies that have internalized these new realities have substantially eliminated the disconnect. Sometimes they are termed learning organizations. Others call them virtual organizations. No matter what name they are called, these companies have the ability to access and process information on global competitive intelligence, new product information, research and development, market trends, and environrmental and regulatory impacts. Having done so, they can act quickly and then move on to the next challenge. Eliminating the disconnect removes many of the obstacles that keep today’s organizations paralyzed.

Many methods for aligning IT resources and business goals are already in use at many companies. I am privileged to visit hundreds of companies every year and I have observed many methods and strategies for aligning business and technology. My conclusion is that there are as many strategies as there are companies. Every organization presents a unique set of constraints and

opportunities. Yet, in the course of visits to companies large and small, I have found that a core set of business strategies is common to the most

successful companies. I have identified five key strategies that learning organizations can adopt to eliminate the disconnect. A combination of these methods is probably the best guarantee of across-the-board success, because each of these strategies is accompanied by inherent risks. The five steps are:

• Select the right CIO.

• Decentralize and disperse information technology resources.

• Transform information technology into a profit center.

• Advance end-user computing.

• Promote evolution, not revolution.

Select the right CIO



I am convinced that while most CEOs are keen judges of character, most don’t have a clue about how to recruit a CIO. Two things need to be kept in mind.

First, selecting the chief IT executive is a job a CEO cannot delegate. If you’re going to have a CIO as one of your top echelon managers, if you’re committed to having a close working partnership, then you have to select the CIO yourself.

Second, there is one fundamental question you have to ask yourself about each CIO candidate. The question is: Is this person CEO material? It seems to me that if this key question can be answered affirmatively, there is a good chance for the beginning of a true partnership between the CEO and the CIO.



Too many CEOs still perceive IT as automating manual processes. Until they see it as a tool to be more competitive, they will be tempted to ask their CFOs to pick the CIO. This is the practice in a little less than half the companies that attend ‘The CEO in a Wired World Conferences’. Most companies have IT reporting to the financial executive. The disconnect cannot be eliminated until this practice is retired and CEOs take personal responsibility to select organizations’
CIOs.

The bottom line is that eliminating the disconnect requires a change of attitude. Both the CEO and CIO have to accept a new outlook. The CEO’s responsibility is to learn some technology and open up the decision-making process. The CIO’s contract is to accept the role of the businessperson chiefly responsible for making the technology serve the business. If the CEO accepts the role of leading this change and the CIO accepts that his or her role is to deliver solutions and relevant information, all properly wrapped to meet the needs of the business, the disconnect will dissolve and be replaced by a new partnership. 

Decentralize and disperse IT resources



Many companies have begun to decentralize or disperse IT resources to better align business and technical objectives. In solving some problems,
decentralization and dispersal introduce others just as troublesome.

Decentralization is a broadly used term. I use it to refer to the process whereby a large, central IT group is broken up and physically placed with the business groups they support, but still report to a central IT unit. Thus while they are physically decentralized, there is no decentralization of management authority. While these groups are still managed by IT professionals, the IT resource is brought closer to the business units and their customers. This can only be good for the company.

Dispersed IT decentralizes management responsibility as well as physically relocating people. The IT professionals generally report to the managers in the business departments and work groups they serve. The result can be a very tight integration of technology and business applications. Often there is a dotted-line relationship between the dispersed IT groups and a central group responsible for IT standards.

There are a number of problematic downsides to decentralization. In many cases, decentralization does not address the alignment problem, because systems are still developed according to traditional methodologies. The disconnect is still in high gear. Instead of one big disconnect, the company has created a number of smaller disconnects. Another downside is enforcing discipline and standards among the autonomous business units. For all its limitations, the centralized data processing function did develop an impressive record for maintaining data integrity, data security, the enforcement of

standards and backup in case of disaster.

My experience is that decentralized IT units establish their own standards and procedures, often without regard to the rest of the enterprise. Without a strong CIO, communication between the decentralized units breaks down. Turnover in IT can also become more of a problem in decentralized units. While an IT professional’s career need not be interrupted by decentralization, IT groups relocated to business units can sometimes be ostracized and relegated into out-of-the-way corners, bypassed by increasingly sophisticated end-users.

Consequently, this kind of reorganization, without explicit attention to the culture, actually worsens the alignment situation.

Providing practical career options for decentralized IT professionals may be the most difficult issue. In some decentralized organizations, many IT professionals feel lost in the business units. Many technical professionals feel constrained. Decentralization limits or terminates as many technical careers as it forges. Technical professionals know this. As a result, turnover can be high in the first few months following decentralization. On the other hand, some technical professionals really learn the business and make a home for themselves on the business side. This outcome has value for both the individual and the organization. For the individual, a business mentality can only add to survival value in today’s economy. For the organization, the combination of up-to-date technical skills with a sound business outlook makes for a valued contributor.

The key items for successful dispersion involve managing the migration to a business culture, which includes preparing both the IT people and their new business unit management. When preparation is not adequate, business unit management sometimes asks central IT to “Take these people back!”

Transform IT to a profit center



Another method for alignment is the conversion of the IT resource into a profit center. The idea here is to make the service nature of the IT resource explicit. In theory, the IT department has to provide its value to the other business units. In practice, the data center retains enough captive business to maintain itself. To help focus the IT resource, users should have the option of contracting with the service that offers the best terms. When competition drives prices down and quality up, everyone benefits.

This strategy can, unfortunately, create a new set of contractual walls between IT and the user. But if the contracting process is managed well, user

departments are much better off than before, when they were the captive customers of an often indifferent IT center.

An extension to this approach is to spin off IT as a separate business entity altogether. This sink-or-swim approach can transform inefficient data centers into models of productivity and can even return a profit to the parent company. The downside is that it forces the data center to focus much more energy on marketing as it pursues business opportunities.

I haven’t seen making IT an independent profit center done well. Peter Drucker regrets coining the term ‘profit center’. His well-taken point is that in the context of the business isolated from the customer, the very concept of the profit center is suspicious. “Profit comes only from the outside,” he writes.

“When the customer returns with a repeat order and his check doesn’t bounce, then you have a profit center. Until then you have only cost centers.” Spinning off IT accomplishes little unless rigorous commitments to marketing, customer service, quality and other business objectives accompany the spin-off.

Advance end-user computing



An emphasis on end-user computing helps align business goals with IT
because it puts both decisions into the hands of the people with the most intimate understanding of the business challenges. End-user computing offloads information processing work to the users with the business expertise and lets them decide how best to do it. The benefits are immediate: Users get the systems they want because they themselves have built them. Since they are totally invested in the process, the resulting systems have a greater chance of being on target, and are more likely to stay on time and on budget.

The principal problem with end-user computing is that end-user groups have not developed the data center disciplines that have been found to result in reliable, secure and robust applications. Systems developed by end-users frequently suffer from data security and integrity flaws. Maintenance of professional standards for data backups, for example, is frequently neglected, which can be a fatal flaw for business-critical systems.

The good news is that emerging system software will help end-users prepare applications that are as reliable and maintainable as those developed by professional programmers. The key is to determine what kinds of systems end-users can be expected to develop reasonably well, and how best to help them develop those systems. The goal is not to turn end-users into

programmers. Rather, the goal is to give end-users tools they can use to access the information they need more easily. This access can be achieved by making people with pertinent programming skills available to end-users as mentors. A side benefit is that end-users learn more about IT and the programming staff learns more about business goals. A favored strategy is to place IT in the business unit, either temporarily or permanently, but have it still report to central IT.

Success depends on being able to move the IT professional into a consulting role to deal with cleanup and documentation requirements for business-critical systems. In any case, it does not seem likely or desirable that end-user computing can manage large, real-time, host-based operational systems, so it addresses only part of the business unit performance issue. 

Promote evolution, not revolution



One consequence of the disconnect is an unthinking preference for revolution. I hope you will resist it. I believe it is almost criminal to destroy existing technology simply because something new comes along. There will always be something new coming along. But it will rarely be in the best interests of your business to abandon what is working well and risk replacing it with something that might work better.

The approach I favor is called intelligent evolution, or building on what we know. It involves taking the technology that we know works as a foundation, and building on that foundation by adding the new technology. The most important aspect of this approach is that it respects and lets you leverage the significant investments you have already made in existing technology.

Think evolution, not revolution. Rethink how you can use existing technology and you may find that you don’t need to discard the old after all. Evolution limits risk while enabling the introduction of new technologies integrated with existing systems, so your company can continue to be responsive to the competitive demands of the market.