Know how the business makes money and retool your business model to make a bigger impact

There was an article posted up on the website Center for CIO Leadership  the other day titled, “IT Paranoia-We’ve got to stop it!”.  I was so amazed that the author, a long time IT veteran, stated this about IT in general, “We are not narrowly focused practitioners who don’t know what’s going on in the company or are indifferent to corporate results.”  Yes you are and this statement couldn’t be further from the truth.  This is just one mindset of a bigger problem with IT still being the roadblock to agility and earning its spot in the boardroom.

Here’s the question IT management people, “How much of an understanding do have on how your company makes money thereby having a staff that knows where the money comes from and where it goes?”  This question gets asked a lot by some consultants with the same answer, “why would I want to do this? I don’t have enough time to do what I need to do now.” The answer is, “well by doing this you will carry out the task of having an IT organization that knows how to see opportunities to differentiate the company from the competition.”

According to the post on the Center for CIO Leadership the author still believes that there are no issues between IT and the business almost like he’s in denial.  There are issues and the key here is to get beyond the old cliché and first step of IT-Business alignment to more of the IT-Business convergence.  The term “IT-Business alignment” is wrong because it implies that IT is separate from the business, whereas IT-Business convergence is the pinnacle in the efforts to integrate, to a higher degree, IT into the business decision process.  To help accomplish that convergence, everyone in IT has to learn how the business makes money and how to use that information to generate new innovations and revenue opportunities. Doing so will help you to increase ITs value to the organization.  Today IT is the roadblock and you need to get it to a point where the lag gaps between change event and the profit are minimal.

The author of the article at Center for CIO Leadership (Paul Ingevaldson), even states that, “I teach a couple of sessions in a local MBA class that focus on IT Management to primarily non-IT students. Each semester I ask the students what they think of their IT department. Invariably I get the following comments:”

  • IT doesn’t get its projects done on time or on budget
  • IT doesn’t understand the business
  • IT is more loyal to IT than to our business
  • IT has their own language – I don’t understand them
  • Why does it take them so long to do anything?
  • IT lacks a sense of urgency

Hello!!! Now not every person in IT will have the bandwidth to pay attention to this but they should.  In most organizations, the IT staff has always been “heads down” and the IT organization as a whole has been content to just be the providers to the business.  But this is a whole new world of business, and if IT wants a seat at the strategic table they have to figure out how to speak the language of business.  There is another point to that statement that gets thrown back out in almost a grade school type fashion almost every day; “business needs to understand IT as well.  IT folks need to just quit complaining and get in the game. IT needs to shoot for a higher-level of understanding here and realize that this is a symbiotic relationship.

It’s time that IT management start thinking like a CEO and CFO.  I will guarantee you this, “that at the top of every CEO’s and CFO’s mind is the fact that for every dollar coming in the front door, a portion is going out the back in the form of costs. If you take time and study that equation you can discover ways to save and generate revenue.”

One of the things that IT needs to do is ask not just how IT contributes to today’s business model, but how that will change in the future.  This really gets folks thinking on a different level (strategically instead of tactically).

At one large customer the Sr VP of IT was asked if he could invite the CFO into one of the department meetings.  He asked why? the answer was that we need a focused conversation around the “bottom line” with the staff.  The importance of the “bottom line” discussion with his team was to share how the company earns revenue, where the profit goes and where excess cash may be invested.  After the meeting the Sr VP stated that this information would be invaluable to help focus his managers thought processes around innovation.  That was the point.  If you understand areas where the company is growing, you can potentially come up with new ideas or different ways to do things that will bring a competitive advantage. These ideas may range from a function on a website to improvements in customer service to changes in internal processes, etc.

The last way that you can help facilitate the move to convergence is to map IT functions to business processes.  Here’s an example; a customer relied heavily on IT to produce its products; customer-facing applications are tightly integrated with the ERP and manufacturing systems. But what was observed during analysis time sitting on the help desk was that agents didn’t understand how all the systems and manufacturing machines were integrated to scan and manufacture this product – which was a highly intricate process.

At the end of the day the  management review stated that the solution to better IT support lay in fostering a more integrated view of business processes and IT operations. In the final report to executive management it suggested they create an “anthropological team” and send this team out to the manufacturing sites to learn about the equipment and systems they were servicing from the user’s point of view, interview the users and document that business-centric view.  By taking the “Anthropologist” view they were able to eventually map out the company’s business processes to each application and the machines they run on and show how each was connected to the others. This map was a powerful illustration of how the employees who create and service each system contribute to their company’s top line. It also worked as a tool to show which systems impact revenue the most and which processes needed infrastructure improvements.

By getting in touch with what the business does, almost to the extent of embedding IT teams into the business, along with retooling the IT business model you can build a deeper understanding of the relationship between how the business makes money and the work it does everyday will be the only way to raise IT to the level that it should be. This will help you create better partnerships with the business users and further the movement to IT-Business convergence.

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