5 Tips on IT Alignment That Can Generate Profit

5 Tips on IT Alignment That Can Generate Profit

IT governance is not IT alignment. This primer on alignment can help you recognize the difference and create increased business value

IT alignment, if done properly, is the CIO's primary tool for creating value strategically in the company, that is, creating significant new profit or increases in the size of your customer base or improvements in your brand. Almost always, increases in value are eventually measured in terms of increased profits.

Most CIOs do not properly understand the purpose or process of IT alignment and could use a little help in better refining their understanding of what it is and what it can do for them.

The CIO has two primary tools to guide the process of building strategic business value in the company. The first of these is IT alignment; the second is IT governance. To properly understand the focus and agenda of an effective CIO, you need to understand the basics of these two tools.

What Is IT Alignment?

First of all, it is worth noting that many IT directors and CIOs think they are doing IT alignment — but most of them are not because they really don't understand what IT alignment is. Many wrongly think that because they have business justifications for each of the projects in their IT projects portfolio, they are aligned. This common misunderstanding of IT alignment defeats the ability to use IT as a strategic competitive lever. Properly understood, IT alignment is the optimum (or near optimum) use of IT to build business value strategically. If the CIO selects the IT projects to be developed based on service requests from the business units, then two things can be virtually guaranteed — and both of these are inconsistent with the objectives of IT alignment. First is that IT is being reactive, versus proactive, in responding to initiatives created by the business units. Second, the business units' requests will not necessarily produce value for the overall business, as most of these requests arise from self-focused tactical needs and not strategic opportunities.

Proper IT alignment requires five steps:

  • Step one requires the strategic goals of the organization to be developed and documented by the executive team. (Note: Goals that are not specific, measurable, strategic and written don't count.)

  • Step two is to collect (or mutually develop) a list of the initiatives being implemented or proposed by the other CXOs to accomplish those strategic goals.

  • The third step requires the CIO to sponsor brainstorming sessions to identify as yet unidentified ways in which IT could contribute more strategically to the identified strategic goals and other business initiatives from steps one and two.

  • Step four is to collectively prioritize these new previously unidentified opportunities and plan to resource them accordingly.

  • The fifth step is to plan for the post-implementation audit of these new projects, determining metrics and the schedules on which they will be collected, as well as their success and failure criteria.

Let's consider the reasons for each of the above five steps.

1. Get a written list of the company's strategic business goals

This will help the entire company focus on the same specific strategic business goals. A strategic business goal might be something like "Increase our market share by 2 percent over the next 12 months" or "Open up a new market in the Pacific Rim of at least $50 million in sales in the next 18 months" or "Increase sales by 15 percent annually for the next three years." Since having too many goals will hamper the ability of the company to prioritize its resources and focus its efforts for maximum value creation, a company usually focuses on between one and five strategic goals. In many midsize and smaller companies, specific written strategic goals don't exist except as vague notions in the head of the CEO. In those cases, the onus falls on the CIO to work with the senior leadership team to create that list. In larger corporations, because good IT alignment is strategically important, often times the CEO looks to the CIO to take the lead in working with the executive team to develop the strategic goals. This list then becomes the target that the entire senior leadership team focuses on for the next 12 to 24 months.

2. Get a list of initiatives being proposed by all other CXOs to accomplish the company's strategic business goals

This ensures that IT resources will be integrated into the strategic initiatives arising from all quarters of the company. This ensures that IT resources will be targeted to provide effective leverage to the strategic efforts sponsored by the other CXOs.

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