We’ve entered the age of the customer, where powerful customers are disrupting every industry. In response, companies will have to change how they develop, market, sell, and deliver products and services directly to their customers and through their partners. CIOs and their teams are crucial to these strategic responses and will have to track transformation and performance with new metrics to go beyond their traditional IT approach to include the business technology (BT) strategy — technology, systems, and processes to win, serve, and retain customers.
Existing approaches to Balanced Scorecards deliver limited value in this new environment. This is why Forrester has created an updated Tech Management Balanced Scorecard (based on the original framework proposed by Robert S. Kaplan and David P. Norton) in which we recommend an approach that addresses four components: business outcomes, agility, health, and service (see Figure).
Here’s a riddle: What is it that almost every organization believes it needs, many organizations have, and few organizations use? The answer is an IT strategy.
CEOs and CFOs task new CIOs and old CIOs alike with developing an IT strategy. But despite the millions of dollars, pounds, euros, and yen spent on creating IT strategy every year, few of these strategies will be put to effective use. The IT strategy is the foundation upon which CIOs communicate the value of IT across the enterprise. Despite this, or perhaps because of this, only 18% of organizations have IT teams that communicate the value of IT effectively.
I’ve been speaking to more and more clients lately who are not just saving money with cloud computing — they’re using the principles of the cloud to completely transform how they source, build, and deliver all IT services. Savvy I&O leaders should look beyond the per-hour savings promised by the cloud to the core tenets of cloud computing itself. How do the public clouds do it? Why can’t you?
Well, you can. You can transform your IT operating model from that of widget-provider to a true service-oriented business partner. Forrester writes extensively about how to make the IT to BT (business technology) transition. I recently spoke at length with the IT management team at Commonwealth Bank of Australia (CBA) about their multi-year IT transformation to what they call “everything-as-a-service.” I was put in touch with them by one of their primary suppliers, cloud service management and automation vendor ServiceMesh.
We’ll be publishing a complete case study soon, but I wanted to share some of the basics here because they outline a strategy anyone can achieve, regardless of your current level of cloud maturity. The bank started by establishing six core tenets to be enforced across all I&O services moving forward, whether hosted internally or externally. These guiding principles neatly summarize the core value dimensions of cloud computing itself:
Pay as you go. Business customers only pay for products and services actually used, on a metered, charge-back basis, under flexible service agreements, as opposed to fixed-term contracts.
As regular readers of my blog will know, I’ve been talking about moving beyond alignment for a number of years now. The fact is, too many CIOs have been able to get by on the basis of managing the technology black box — and CEOs and CFOs have been complicit in allowing these same CIOs the freedom to do what they want within tightly controlled budgets, not wanting to sully their hands with “all that technology stuff.” But those days are rapidly coming to an end. The technology genie is out of the bottle; today’s business-unit leaders are more dependent on technology than ever before, and they are also much more tech-savvy. CIOs can no longer hide behind the technology black box — it’s time to change the IT game forever. It’s time for IT to drive business results and connect all technology investments to business outcomes.
Today’s new CEOs are looking to CIOs and IT to make a direct impact on business goals from investments in technology. While every business must make technology investments to sustain operations, IT must move beyond simply keeping the lights on and connect the dots between effective growth strategies and new technology investments. This requires a different set of technology and business skills: different people, process, and technology in the IT organization. In fact, the organization is so different we now call it the business technology organization, or BT. The distinction between IT and BT is subtle but important. BT represents the fusion of the IT organization into the rest of the business. In a BT organization, the lines between IT and business units are blurred. What is important is a focus on the roles needed for effective business technology strategy execution. What’s not important are reporting lines.
Of late I’ve been considering a more mundane version of the ultimate question — what is the ideal metric to use when evaluating business technology strategies? The challenge is that we already have a diverse set of investment metrics from which to choose. There’s Return On Investment (ROI), Net Present Value (NPV), Internal Rate Of return (IRR) and Payback period to name a few of the most common. Yet I can’t help feeling they all lack a little something — the ability to connect the project with the desired business outcome, which for a strategy is the attainment of the goal.
Recently I’ve been working with clients to apply a different measure — the T2BI ratio:
Yes, that’s right — I’m suggesting CIOs should stop working on IT strategy. The days of developing a technology strategy that aligns to business strategy need to be behind us. Today’s CIOs must focus on business strategy.
Let’s face it: Does sound business strategy even exist today without technology? Most CEOs would likely agree that, unless you are running a lemonade stand, any successful business strategy must have solid technology at its core. The challenge for today’s CEOs is that, while planning business strategy in isolation from technology is sub-optimal, it remains the most common way business leaders develop strategy. And while there have been many great books about strategy, the specific challenges facing the CIO are largely absent.
That’s why Forrester has researched the ways in which companies develop technology strategy and also why we have developed the Business Technology Strategic Planning (BTSP) Framework. Our new BTSP framework distills Forrester’s current research into an easy-to-follow guide that has at its heart the understanding that there should be no IT strategy, just business strategy with a technology component, or BT strategy.
Now you might think we’re crazy — after all, many firms, including Forrester, earn substantial revenue from advising CIOs on IT strategy. But as I see it, IT strategic plans belong in a museum.