Proactive IT Managers Can Make a Difference

  • Written By: William R. Friend
  • Published On: May 14 2004



Proactive IT Managers Can Make a Difference
Featured Author - William R. Friend* - May 14, 2004

Introduction

In the back of every CIO's mind at the time of the annual performance review are two questions: "Do I run an IT shop that is aligned with the requirements of our business?" and "Are the IT projects we are doing generating an acceptable return on investment?"

In the short term, the more expedient CIO might just try to align IT results with the expectations of the CEO and assume that they are on track. However, from a strategic point of view, an IT organization needs to view business alignments from two perspectives. The first perspective is to formulate action plans and budgets that support the operational business plan. In other words, react and align IT with the business plan that is in place. The other perspective is to develop a framework that will raise organizational awareness of IT opportunities. This means proactively exposing the enterprise to the areas where IT can make a difference in the business.

*In Memoriam

Taking a Broader Perspective on IT Requirements

Traditionally, many IT organizations build their IT action plans from the objectives that make up the overall operational business plan. In a relatively straight-forward exercise, a CIO can lay out the relationships between enterprise objectives and IT action plans and budgets. While this approach solves the short-term issues of IT alignment with the business, it can miss strategic opportunities where business managers and planners may not have considered the potential business contributions of IT.

This is where the CIO has an opportunity to proactively work in advance of the operational planning cycle to develop a framework that business managers and planners can use to integrate IT opportunities into the operational business plan before IT action plans are developed.

Components of an Alignment Framework

In the early 1990's the American Productivity and Quality Center (APQC), Houston, Texas (US), conducted a number of pilot projects to determine methodologies for improving white-collar productivity. One of the major findings of the study was that real, measurable improvement in productivity occurred only in those pilot projects that were designed to work on problems in the interface between organizations.

The APQC studies found that projects that were designed to optimize productivity inside of a department ended up making more work for the down or up stream departments that were involved in the work flow. On the other hand, when two or more organizations worked together on improving the handoff between their organizations real, measurable productivity results developed.

This conclusion shouldn't be too surprising given the way managers are usually held accountable for departmental results and not encouraged to manage beyond the "walls" of their organization. Ken Pyles, manager of IT at the Idaho agribusiness giant J.R. Simplot Company observed, "IT projects that focus on departmental productivity improvement are really hard to measure. When we have projects that are funded by several departments that work on improving an entire business process, that's when we find real economic benefit".

It is also important to look for opportunities outside of the parameters of currently installed package software. ERP packages in particular tend to have a departmental/functional focus. Many of the opportunities for added IT value will come from the interfaces between standard ERP components and the unique requirements of your business.

If we look at the opportunities for IT in this context, there are the following major organizational activities to consider:

The five interfaces where IT planners should look for high productivity and resulting high return on investment (ROI) projects are in the

  • Service/production interface with buy side supply chain

  • Service/production interface with sell side supply chain

  • Service/production interface with corporate enterprise

  • Corporate enterprise interface with buy side supply chain

  • Corporate enterprise interface with sell side supply chain

From an IT point of view, these interfaces should be examined with the following questions in mind:

  1. Are the appropriate data elements available to exchange information through the interface? In other words, do we have the right information moving through the interface?

  2. Does information transfer through the interface fast enough to meet business requirements?

  3. Is the information accurate enough to use for business decisions?

  4. Will improvements in data availability, speed, and accuracy return economic value ?

Using the Results

The benefit of a simple initial framework is that it can be used to compare business initiatives with the current IT projects. At a top line level, just marking the current enterprise strategic objectives and all the current IT projects on figure 1 will give a graphic representation of the alignment between IT resources and business initiatives.

Using this framework, it may be interesting to see where the enterprise strategic objectives fall on the framework. If they mostly fall within departmental jurisdictions and not at the organizational interfaces, the IT manager will have a more difficult job convincing the organization to move some priorities out to the organizational interfaces.

Conclusions

IT alignment and ROI from IT projects are two sides of the same coin. If IT isn't aligned with the corporate strategic objectives, the ROI associated with those projects will not be attributed to IT. If IT generates projects that have high ROI but are not aligned with corporate strategic objectives, IT will not get credit for their contribution. IT leaders should consider initially developing simple frameworks for evaluating the extent to which they are aligning with corporate strategic objectives. The graphic framework we have described could be used as a starting point for integrating IT into the corporate planning process. Once corporate strategic objectives are well understood, IT can move to incorporate improvements in the interface and process flows that will impact the corporate objectives, thus helping to increase the ROI from IT investments.

In Memoriam

Bill Friend was a consultant, writer, and speaker who specialized in the application of IT to business problems in the process industries. He was a principal of WR Friend & Associates and had over twenty-five years executive experience in food and chemical manufacturing. Bill co-wrote a monthly column "Managing Software" for Food Engineering (www.foodengineeringmag.com) and was a co-founder of the Food, Chemical and Life Science CIO Forums found at www.foodcioforum.com, www.chemcioforum.com, and www.lifesciencecioforum.com.

He was a colleague and valued contributor to the TEC site. He will be missed.

 
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