Uli Kalex from Alfabet, whom many of you know, has provided us with a guest post addressing one key fallacy which underlies much of IT’s work with their business. I hope you enjoy it and feel free to comment.
As a mathematician and product manager, I strongly prefer the reliability of analysis over the uncertainty of gambling. That is why I like to go to Las Vegas . . . at least for the annual Forrester CIO and EA Forums. Thought and industry leaders from around the world get together and discuss the driving forces and challenges in IT management. As such, I experienced this year’s event as a real catalyst for discussions around the increased requirements and frustrations in IT planning — and a call to arms for IT leaders everywhere.
Dwight D. Eisenhower once famously said: “Plans are worthless, but planning is everything.” He was talking about armed conflicts, but the statement holds a lot of truth for today’s businesses as well. In the business world, an unforeseen change can make even the most sophisticated plan obsolete overnight — be it a change in regulation, a budget cut, or a company acquisition. To survive and thrive in this increasingly complex and dynamic environment, businesses need an IT organization that shows a path to meet business objectives while being flexible and responsive enough to adapt as needed. Ultimately, the best route is always changing.
Several recent reports on Forrester.com start with the sentence: "EA organizations often toil out of the limelight . . . " There are fewer and fewer reasons why this should be the case.
We hear fewer stories of EA teams as purely "the standards police" or with "their heads in the clouds, not producing anything useful." We hear more and more stories of EA teams changing how business and IT plan, taking the lead in application simplification and rationalization, or being the broker for innovation. Infoworld and Forrester want to recognize these success stories with the 2011 Enterprise Architecture Award.
Discover Financial created an EA repository that aggregates information from its Service Catalog, Fixed Asset, PPM, and Business Goals to provide decision-making insights that saved more than $1M of avoided costs.
Aetna used its Business Capability Map to combine more than 30 business unit strategies and road maps, highlighting common opportunities and gaps that it then used for its annual planning.
As CEOs put IT budgets under pressure year after year, CIOs and their teams focus on balancing money spent on running the business (RTB) versus money spent on growing the business (GTB). By decreasing the percentage of their budget spent on maintenance and ongoing operations (RTB), they aim to have a greater share of their budget to spend on projects that grow the business. In the best IT organizations, the ratio can sometimes approach 50:50 — however, a more typical ratio is 70% RTB and 30% GTB.
Unfortunately, such practices suggest an incremental budget cycle — one that looks at the prior year’s spend to determine the next year’s budget. While this may be appropriate for the RTB portion of the IT budget, it is far from ideal for the GTB portion. Incremental budgeting for GTB results in enormous tradeoffs being made as part of the IT governance process, with steering committees making decisions on which projects can be funded based upon the IT and business strategy. Anyone from outside of IT who has worked through IT governance committees understands just how challenging that process can be. And the ultimate result of such tradeoffs is that sometimes valuable projects go unfunded or shadow-IT projects spring up to avoid the process altogether.
Many companies are at the height of the IT strategic-planning season. For some, this is an annual ritual tied to the budgeting process. For others, this is part of a long-range planning process, with an annual review to check on progress. Still other CIOs are approaching the development of an IT strategy as an integral part of an ever-evolving business strategy, with regular adjustments as the business units flex and respond to market changes. Whatever your perspective, it’s apparent that in the past executives outside of IT have given scant attention to the machinations of the IT strategy — but this is surely changing.
The operational performance of any business unit is now so heavily dependent upon the effective and efficient deployment of appropriate technology that planning a business strategy without also planning technology strategy is like planning to win Formula One without any telemetry. You can’t even get to the starting grid.