Posted by: Long Huynh | April 22, 2009

A Darwinian View of a Successful IT Organization

A fortnight ago, I submitted a post called “3 steps to a successful CIO” in which I surmised that his/her journey from the geek kingdom to the boardroom would follow a Darwinian evolution. This follow-up post will expand on that theme by suggesting that this journey cannot skip over any step but could be accelerated through a conscious and judicious application of the 3 concepts: Optimization – Alignment – Growth. Each concept will be further elaborated in an upcoming 3-part series.

Alignment cannot be achieved without Optimization –

In reading recent articles on IT challenges, one realizes that the highest preoccupation by an CIO today is the issue of Business-IT Alignment. A survey run by Peter Thomas back in January provided some good indication: 27% of the senior IT managers said that Alignment is at the top of business issues that they face, followed by Cost Saving at 14%. Yes, the latest poll today might show Cost Saving gaining ground, but it is more an example of Business-IT Alignment in this economic downturn situation than a preoccupation with Optimization per se.

Yet another survey of more than 500 executives, this time by Bain & Company about a year ago painted a sobering picture about the risk of being Aligned while not Optimized. The key findings were that:

“Nearly three-quarters believed their IT capability was neither highly aligned with their business goals nor highly effective … These firms recorded a slower rate of growth–2 per cent below the three-year average–while spending the same as the average on IT.”

and:

“The rarest breed was both highly aligned and effective. Such “IT-enabled” organisations amounted to only 7 per cent. But they recorded a compound three-year growth rate 35 per cent higher than the average. Moreover, they spent 6 per cent less than the average respondents.”

but the real eye-opener was:

“More troubling was the 11 per cent of companies in which IT was highly aligned but not highly effective. These companies fared much worse. Their IT spending was 13 per cent higher than average, but their three-year growth was 14 per cent lower than average. These firms were in the “alignment trap”.”

According to the survey, an IT-enabled organization spent 19% less and generated 49% more in growth rate than a highly-aligned-but-not-highly-effective one.

I remember one IT Outsourcing organization who prides itself for its Flexibility. The IT group is highly aligned with the Business in this vision and structures its services accordingly. It means that it offers customized IT Infrastructure Management services to its clients with minimal change to the support model that the client is familiar and comfortable with. The outcome after several years of accelerated growth is that the IT spending rate started to overtake the growth rate because they are forced to maintain different technology platforms, operating processes and support staff for different clients. The sad truth is that this is not a unique case.

Growth cannot be achieved without Alignment –

What happen now to those highly effective IT organizations which have standardized the processes, implemented an enterprise-level resource planning system, consolidated all data centers, and delivered projects on time, on budget? The chance is they are pretty much aligned with Business already (7% as mentioned above). But the same survey by Bain & Company also indicated that more than half of these highly effective IT organizations (8%) were not aligned with Business at all. Why?

It should not be a surprise if we understand that Business is a constant change. It flies in the face of Stability and Predictability that these 8% try to instill in the organization. A CIO who has succeeded in optimizing its IT shop, often at great costs, would not be open to new elements which could upset the established order. Does it sound familiar the cautious comments from a CIO about the adoption of any new platforms, be it mobility, business analytics or social networking media?

A case in point: An insurance company would like to provide its assessors a quick,easy access to the claimants’ files (policies and claim records) while on the road. The Chief Marketing Officer (CMO) prefers an Internet-based solution, accessible anywhere by authorized agents equipped with Blackberrys. She needs to introduce the service fast to use the new Claim Assessment capability in a CEO-approved blockbuster ad campaign. The CFO supports his colleague CRM, thinking that such a solution could be put in place within a month and would be inexpensive. The CIO is in disagreement. He thinks that the Internet is not stable (its uptime is not 100% guaranteed) nor safe (for privacy of data). He proposes instead a Web-based application located on a secured server behind the corporate firewalls and accessible over a secured VPN. It would take several months (just ordering the connection lines from the telcos would take more than 6 weeks, notwithstanding the need for a business case, a feasibility study, a revision of the enterprise architecture, an operation readiness assessment, a project charter …) and the investment may not be insignificant as the CFO has thought (sorry, no figures available yet). Who is right?

In my mind, the CIO has failed to stay aligned with the business and regardless of which solution would be picked eventually, he misses an opportunity to connect and solidify his position as a business executive. The CIO should realize by now that his company’s business (and his) requires quick and sound solutions at the same time, not a trade-off between one business imperative (quick to market) and another (safeguard of confidential data). He should anticipate such request from a fellow CxO and be ready with a win-win solution instead of coming across as a business ignorant.

Optimization cannot be achieved without Growth –

On the surface, the CIO can cut costs, maximize the use of automated tools, minimize the number of non-standard equipment, trim the staff, eliminate overhead expenses. But for how long? The harsh reality is that there is a limit to the resources at hand and without growth, a limit to their optimization. Growth provides scope and scale that the CIO can leverage.

That does not mean that the IT organization is counting on business growth to increase its budget. Growth also means getting more mature, more “mainstream”. Mature enough to let go of unnecessary baggage (do you really need to manage the Help Desk or the Data Center yourself?). Mainstream enough to blur the line between business and IT people, to let business staff using self-serve IT functions and to have IT staff participating in routine business functions (e.g. managing and reporting on its own financial performance). Only then that Optimization becomes a self-adjusted and continuous improvement process.

Accelerating the Evolution Cycle –

You may think that my premise is a circular reasoning or a kind of Catch-22. It could be if you think strictly in linear terms. However, if you consider the 3 steps of Optimization – Alignment – Growth as a collection of short evolution cycles that spiral upward (like a staircase to heaven), you can make small yet steady progress toward Success. Watch for the new series here soon.

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Responses

  1. Thanks for the link.

    Peter

  2. […] SEOcontest2008 added an interesting post today on A Darwinian View of a Successful IT OrganizationHere’s a small reading…an example of Business-IT Alignment in this economic downturn situation … The harsh reality is that there is a limit to the resources at hand […]

  3. […] Tweet, it depends on the maturity level of the IT organization – As explained in an earlier post (A Darwinian view of a successful IT organization), the challenges facing an IT organization in the early stage of evolution (Optimization) are […]


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