The ability to connect technology investments to business strategy and business outcomes has always been a critical factor determining a CIO’s success. Yet this connection - often referred to as ‘alignment’ - remains elusive for the vast majority of CIOs.
While most IT groups broadly align with the business, only 21 per cent describe IT as ‘highly aligned,’ and just 4 per cent identify IT as ‘fully integrated’ into the business.
The pain of not just achieving alignment, but also maintaining alignment over time is on the rise. One needs to only consider the complexities of untangling IT systems in the face of increasing corporate restructuring, accelerating changes in consumer preferences, and ongoing financial uncertainty to realise that the traditional process of developing a standalone IT strategic plan ‘aligned’ with business strategy is not enough.
The CIO needs to be part of the business strategy as it is developed. In fact, we would argue there should not be a standalone IT strategic plan at all - your organisation needs to develop business technology strategy - or business strategy with embedded technology components.
Over time, successful CIOs will play a vital role in shaping business strategy, defining the business technology direction for the organisation, and demonstrating their business acumen by delivering direct business impact measured in business outcomes.
To achieve success, CIOs need to drive a change in IT philosophy - IT professionals must see themselves as an integral part of the business and no longer think in terms of ‘IT’ and ‘the business.’
To help drive this change and create a template for success, Forrester has published a Business Technology Strategic Planning (BTSP) framework based on best practices gathered from research over the past six years. This new framework depends on understanding business goals and using business capabilities to drive toward optimising business technology strategy.
Begin with clear goals
All effective strategies begin with clear goals. Unfortunately, many organisations have aspirational goals that make strategic planning difficult at best, and they lack the mechanism to translate aspirations into strategies.
Goals should set out in very clear terms what the organisation aims to achieve in a given period of time and form the basis for business executives to develop strategies that describe how the goals will be attained. IT leaders can play a pivotal role in shaping strategy options by leveraging the organisation’s technology capabilities.
Before the IT organisation can help business leaders develop effective strategy, you may need to help refine the business goals. CIOs must develop the capability within the IT organisation to use probing questions to help business leaders clarify goals and articulate specific, measurable, attainable, relevant and time-bound goals.
This is not always easy, and it depends on having the right relationship with business leaders across the organisation. Once goals are clearly defined, use business capability maps to focus strategy discussions around business changes and not technologies.
Driving effective strategy choices
Beyond refining goals we need to understand the organisation’s capabilities in order to determine strategy options to achieve the goals. Capabilities define the things the organisation must be able to do - remove a capability and the organisation will fail.
Strategic capabilities are the capabilities which allow the organisation to succeed in the marketplace - these are the capabilities which differentiate the organisation from the competition. Each successful organisation has two or three strategic capabilities that it uses to differentiate its products or services in the marketplace and deliver customer value (see figure).
The capability map of the organisation collects together all the capabilities essential to the business operating model and value chain, including capabilities outsourced to strategic partners.
New strategy options are discovered by explicitly exploring how changes in business capabilities, and strategic capabilities in particular, produce desired business outcomes which move the organisation toward its goals. Business capability maps provide the context for a business-outcome oriented discussion with executives and managers.
Strategic planning capability maps
For strategic planning, it’s important to develop maps at the right level - while executives can instinctively understand 30 high-level capabilities of the business, they lack the time and attention to detail to go through a capability map with hundreds of capabilities.
Even without formalising them as part of a strategic planning process, business capability maps help drive strategic directions and decision-making for IT.
Capability maps have many uses in IT beyond strategic planning, so it is important to focus the design of the business capability map used in strategic planning on its purpose as a vehicle to drive and focus strategy discussion.
We suggest you consider these five tenets of developing good strategic planning capability maps:
- Capabilities represent stable business functions.
- They identify unique business abilities.
- They are abstracted from organisational, technology, and process models.
- They allow extension to specific implementations.
- They capture the business executives’ interest.
This final point is crucial. A major challenge is identifying capabilities that resonate with business leaders across the organisation. If the map holds too little detail, stakeholders won’t be able to see their connection to the model; if it holds too much detail, stakeholders will only understand the part that pertains to them.
The capability map puts individual capabilities in relationship with each other, enabling business leaders and IT to see the larger context for these capabilities - for example, the relationship between a ‘sales’ capability and a ‘customer experience’ one.
Executing IT strategic planning
As you seek to implement a new strategic planning process, with IT strategists as partners at the strategy planning table, you need to anticipate some resistance to change. One of the scenarios: IT is not part of the formal strategic planning process.
If your organisation already has a group of people dedicated to developing business strategy, they may not be receptive to IT telling them how to do their job - or at least that’s how they might perceive it. In this case, we recommend involving the strategy group very early on.
Enlist their help in jointly defining a framework that will work for your entire organisation and better help define future technology needs. Over time, and with the development of trust, you will be able to exert more influence on their process.
Another barrier: what if the organisation doesn’t do strategic planning? Sometimes IT is looking to help develop strategy because the organisation seemingly lacks strategic thinking. The challenge here is that IT may struggle when describing the planning effort as strategic planning.
Instead of pushing against the culture, describe this framework as a way to better understand the business needs and deliver the technology needed to help leaders be successful. Simply avoid describing it as strategy if necessary.
Finally, when IT staff attempt to perfectly define the business capability map and present it to the business leadership team as a finished model, it is all too easy for business executives to see capability maps as another IT toy.
As a result the business-unit leaders may lack ownership of the model. Instead, focus on socialising the concept of a capability map as a generic business tool to help drive a business discussion.
Make sure all leaders in the organisation have the opportunity to make the map their own by helping define it. In one company Forrester worked with, one business executive remarked, ‘This is the first time I’ve met with IT and had a real business discussion without focusing on technology. It was very refreshing.’
Nigel Fenwick and John Brand are VPs and Principal Analysts at Forrester Research serving CIOs. For more information, please see the Forrester blog for CIOs.