Outdated perceptions by business leaders in and outside of IT are constraining the critical contribution IT can be making to your value chain. Most likely, your IT department fails to drive revenue or leverage its technology leadership to identify new markets, products, and services.
IT began as a back-office function supporting ERP, supply chain, corporate networks, reporting, and end-user support. Today, it often still serves in those legacy roles.
The oft-repeated advice is to align IT with the business, but alignment on mission will not alone turn IT into a competitive advantage. In the rare instances where IT is a competitive advantage, it’s held accountable to the same high standards for innovation and performance as traditional business units, in essence an IT-as-a-business approach.
Today’s landscape is bursting with soaring customer expectations and increasing competition at ever-increasing velocity and from new directions. Add to that the cost pressures and technology disruption most industries are facing, and the result is an unprecedented need for nimble decision-making and execution that IT needs to drive, not simply participate in.
Developing an IT business that is dynamic and nimble results in a boost in both top-line and bottom-line performance. Below are six steps to transition your IT department from a support function to a business unit.
Define the IT Business Landscape
It’s critical that IT understand and be a full participant in the overall business strategy. For example, if a goal is customer acquisition and retention, IT-as-a-business looks to combine in-house and third-party data to get to actionable insights quickly, without being beholden to the traditional IT procurement cycle that is too slow and focused on cost and activity versus time to market. When IT is engaged at this level, its internal strategy shifts away from strictly functional support to revenue thinking. This should be the norm, not the exception.
Consider What Vehicles IT Will Use
Trend lines published by Gartner indicate that decisions on investments in applications will increasingly be in the hands of CMOs versus CIOs. The only way back to the table for IT is to be a strategic partner versus a procurement partner. Outdated IT thinking is over-indexed on cost management and technology. IT-as-a-business thinking requires a forward focus on driving new top-line opportunities, creating competitive advantage, and shortening time to market, supported by appropriate risk taking and cost management.
Beware of the latest overhyped technology solutions such as “Business Intelligence Self Service” or “Big Data and Advanced Analytics.” While such capabilities can be highly effective, the methods by which they are adopted and procured often need significant improvement. Typically, IT procurement is slow, burdened by high overhead costs, and results in something much less nimble and capable than promised. That’s an unacceptable outcome in any other business unit. IT shouldn’t tolerate it either.
Differentiate IT From Outside Competition
IT has a reputation for being slow and difficult, and there are plenty of outside technology companies ready to capitalize on the concomitant frustration. With purchasing power shifting from the CIO to the CMO or other business leaders, IT is in danger of remaining a supporting function versus transforming into a strategic business unit. Without proper positioning and improved performance, IT will more frequently and appropriately get bypassed.
IT as a business must identify, communicate, and demonstrate a solid value proposition to the organization as a whole. If IT’s value proposition isn’t improving business agility, expediting decision making, or capitalizing on emerging technology to enhance revenue or enter new markets, you’re off track.
Look at the EconomicsWhen the business goes outside of IT to find solutions to support its objectives, the company essentially pays for two IT departments. Let’s be frank: if you’ve had leaky IT or shadow IT enter your organization, it’s because your IT organization is underperforming, either operationally, in defining and marketing its value proposition, or both. But if you treat IT as a business unit and measure it like one, IT will either improve, perform, or be divested, just like any other business unit.
Create a Roadmap
There needs to be a clear way forward for IT to demonstrate and deliver its strategic value proposition. The roadmap should outline the best way to maximize time-to-market advantage with the right sequence of moves. This looks different for each initiative, based on such factors as market situation, resources, and organizational readiness. Don’t make the common mistake that IT has to do it all in-house. Rapid technology evolution, talent scarcity, and first-mover advantage often require buying the expertise.
No business unit operates without KPIs, and IT should be no different. IT’s indicators should look at such business metrics as revenue and margin contribution, time-to-market acceleration, and customer satisfaction, in addition to department-specific, on-time project delivery and ticket resolution.
Execute, Execute, Execute
Just as there is no yin without yang, there is no execution without strategy. Therein lies IT’s historical problem. There has been an imbalanced focus on execution and not enough on business-focused, top-line strategy. Executing to an actionable strategy versus executing for executing’s sake is key in IT becoming a competitive advantage.
Treating IT as a business addresses nearly all of the traditional complaints about the IT department. It enables IT to speak a common language with the CFO and the rest of the organization. It elevates strategic thinking across the organization, enabling competitive differentiation and advantage.
Simply put, when you elevate and operate IT as a business, the perceived impediments are explicitly removed lifting the performance of the entire organization.
Tracy Currie is CEO and co-founder of Capto, a business-improvement adviser in such areas IT strategy, sourcing, data center services, and investment advisory or M&A support.