What’s The Matter with IT?

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Information technology has come under attack from many quarters since the bursting of the dot-com bubble. Yet another blow was struck recently in Harvard Business Review's sensationally titled article, "IT Doesn't Matter"†. The IT community, still smarting from a two year slump in business volume and an unprecedented slide in stock prices, was quick to rebut the article's contention that IT may no longer be the basis for competitive advantage. The wave of rebuttals included comments by industry luminaries such as Bill Gates of Microsoft and Intel's Craig Barrett, and even gave impulse to a book by Smith and Fingar, IT Doesn't Matter - Business Processes Do.††

Meanwhile, a sprinkling of articles appeared on the need for IT to improve in terms of meeting senior executives' expectations, including an article based on research in France, "What CEO's Really Think of IT," where it was reported that "CEOs attribute the gap between expected and actual performance mainly to the insufficient involvement of business units in IT projects, to the weak oversight and management of these projects, and to IT's inadequate understanding of their business requirements."†††

It's sad, but true - that in far too many organizations' IT investments are not linked to business strategy. The payoff from IT initiatives is frequently perceived to be poor. There's too much technology for its own sake, and the relationship between IT users and IT practitioners is often dysfunctional.

On the other hand, there have been significant advances in process-oriented technologies including the emergence of a totally new category of business process management (BPM) software. From a senior management perspective, the good news is that there is very little wrong with IT that a healthy dose of business process thinking by senior line executives and IT practitioners wouldn't go a long way toward fixing.

The root cause of many IT horror stories can be attributed to senior executives' traditional functional mindsets.†††† These traditional mental models and behaviors have driven executives at more than a few organizations to look for that IT silver bullet or panacea, be it an ERP or a CRM system. Instead of taking the time and energy to develop a shared understanding of which enterprise-wide business processes need to be improved and by how much in order to deliver on strategy, and only then determine what the role of technology should be, it was easier to throw problems over the wall to IT. After all, the IT folks are accountable for process and technology - right?

The traditional departmental view of business has not only driven silo thinking by executives, but it has also played a role in perpetuating siloed applications thinking by IT specialists. This has led to a situation where the answer to the question of "Who is ultimately accountable for technology-enabled business performance improvement at the enterprise level?" is "No one."

Maybe it's high time that executive leadership share accountability for the deployment of IT? If you agree, then there are four cornerstones to a new and more effective way of thinking and acting at the commanding heights:

Articulate the firm's strategy in terms of the performance of its end-to-end, enterprise business processesDefine and assess the deployment of enabling technology in terms of the observable and quantifiable improvement to business process performanceCreate shared accountability by business unit and technical executives for the deployment for information technology Modify the management reward systems so that some part of executive compensation is based on enterprise business process performance

 

While each of these thought patterns are essential, articulating the firm's strategy in terms of the performance of its enterprise business processes is arguably the absolute prerequisite. Of course this requires that the leadership team take the time and energy to define the firm's cross-functional, end-to-end business processes at the enterprise level and define current measures of performance for each - both from the customer's and the company's perspectives. This exercise allows leaders to explore answers to vital business questions: What output does a given business process provide to customers? What do customers expect? How are we doing relative to customer expectations? What are the major steps and handoffs in these large cross-departmental enterprise business processes? What are the interdependencies with other business processes? What implications are there for technology, training and communication? Only when answers to these tough questions are postulated is it possible to set the stage for a tight integration of IT investments to strategy.

The deployment of enabling technology must then be defined and assessed in terms of the observable and quantifiable improvements to business process performance. Again, this requires a shared understanding of which business processes need to perform at what levels in order to deliver on strategic goals. Again enabling technology decisions require asking and answering a series of key business questions: Which projects are likely to have the greatest impact on achieving current strategy? What is the best sequence for deploying enabling technology? Are we clear on how IT initiatives will be measured in terms of the value added to business process performance with metrics around improvements in time, cost, quality and productivity? Is technology selected based on a pre-defined improvement objective and the extent to which it will support the people doing the work? How many concurrent projects can the organization reasonably sustain?

Although commonsensical and straightforward, the process-managed enterprise is significantly different from organizations managed according to traditional functional lines. In traditionally-managed companies, the responsibility for developing an IT strategy is often delegated to the senior IT executive and the IT staff. Because IT specialists are often more knowledgeable about technology than they are about the business, a lack of clarity on the business benefits of IT initiatives and the proliferation of IT projects are common results. So, it's no surprise that there's some finger pointing at the IT department when projects don't deliver on time or meet expectations.

Business process thinking increases the chances that the leadership team will take their rightful accountability for IT investments as the top team develops a shared understanding of the performance gaps in the execution of key enterprise-wide business processes. By creating shared accountability across business unit and technical executives for the deployment for IT, senior management can acquire a clearer sense of where technology will enable true performance improvements. With this knowledge, they can make more informed decisions on which IT projects should be funded, what results can be expected and what the likely pay-back might be. This approach shifts thinking from individual applications and departments to customer focus and business process performance.

Possibly the toughest hurdle to implementing business process thinking at the top is the need to modify senior management rewards. In many organizations, there seems to be a real reluctance to base some portion of senior management compensation on business process performance. On the other hand, this linkage is critical to reinforce the commitment to business process thinking and behavior. Remember the old adage, "what gets measured gets done - what gets rewarded gets done consistently." For executives that cannot let go of established customs, perhaps the Sarbanes-Oxley act will contribute significantly to the needed change in thinking in the executive suite, for the pain of externally imposed accountability is indeed a great motivator.

How difficult is it to make this transition and instill business process thinking? Candidly, it involves a lot of hard work and will make some traditional executives extremely uncomfortable. However, the benefits far outweigh the discomfort. Business process thinking at the enterprise level makes it possible for the executive team to gain greater clarity on strategic direction, create a more robust measurement framework, gain insights into organization alignment and get more out of enabling technology.††††† In this manner, business process thinking serves to assure that IT investments are more closely linked to business strategy, and that the payoff from IT investments is directly linked to specific improvements in business process performance. It will also minimize the chances that technology is implemented for its own sake, and improve the relationship between IT users and IT practitioners - ensuring that IT matters in your organization.

Is it worth the effort? Well now; initially that's your decision - but ultimately your customers will be the judges!

 

 † Carr, Nicholas G., “IT Doesn’t Matter,” Harvard Business Review, May 2003, pg 41-49.
†† Smith, Howard and Peter Fingar, IT Doesn’t Matter – Business Processes Do, Meghan-Kiffer Press, September, 2003, www.bpm3.com/hbr
††† Monnoyer, Eric, “What CEO’s Really Think of IT”, The McKinsey Quarterly, 2003 Number 3
†††† Spanyi, Andrew, “Don’t Just Automate: Collaborate,” September 2003, www.bmpg.org
††††† Spanyi, Andrew, ‘Business Process Management is a Team Sport’, Anclote Press, 2003

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