Let The Business Drive IT Strategy

by Chris Potts

February 2010

“Those who are skilled at executing a strategy” Sun Tzu wrote, “bend the strategies of others without conflict.” This basic principle helps to explain why some CIOs are now having more success than others at executing strategy.  The IT department that once held a monopoly over its company’s IT is gone, and with it the control-based, IT-centric strategy conceived for the mainframe era. Changes in the business environment have rendered such strategies un-executable.
With the advent of Web 2.0 and the oddly-named ‘shadow IT’, CIOs know that their control over IT decisions is more limited by the day. Instead, their companies’ executives, managers, staff and customers all have their own personal strategies for exploiting IT. Faced with this challenge, CIOs are exploring their options. These include abandoning the idea of an IT strategy, sticking with the old way, or forging a new generation of ‘IT exploitation’ strategies. Wrapped up in this decision is the ultimate destiny of the CIO role itself, which in some companies is becoming marginalised as a quasi-supplier of technology-related services and in others is disappearing altogether.
The CIO’s strategic challenge is to capture and channel the energy of individuals’ personal strategies for exploiting IT. Backed by a corporate purpose to maximise total value, innovate, constrain overall cost and mitigate risk, effective CIOs must focus on, as Sun Tzu might say, ‘bending’ some of these personal strategies towards a better conclusion or - with individuals who are pursuing goals that harm the company strategy - into a dead end. Many personal strategies can simply be encouraged, or strategically ignored.

Why IT Strategy Is No More

Two major inflection points have directed us to where we are today. The first was the switch from dumb-terminal to client-server computing that started 20-odd years ago and went global with the Internet. The second was business executives’ response to Y2k and the dotcom boom.
Business people stopped believing IT hype and techno-speak, suspecting that investments were being driven more by suppliers’ strategies than their own. They took control of the IT agenda at a big picture level and focused on two things they understand very well – cost, and business innovation.
These inflections put IT decision-making in the hands of non-technologists at both operational and strategic levels. Yet formal strategies for IT have largely remained the province of IT departments and vendors. Few non-IT executives and managers have defined their strategies for investing in and exploiting IT; such strategies are, therefore, de facto. CIOs can make a tactical choice: to follow these de facto strategies; rely on an orthodox IT strategy; or take the lead with a new corporate strategy for exploiting IT.
So far, CIOs’ responses to this changing environment have been mixed. A few have continued with an orthodox IT Strategy, while others have simply stopped leading a corporate-level strategy at all, preferring to ‘align’ with - or follow - everyone else while concentrating on an operational strategy for the IT department.
Some CIOs (and I have been fortune to work with a number of them) have taken the third approach. They are collaborating with their executive colleagues to formulate and execute a new corporate strategy for exploiting IT. This is very different from the traditional IT-centric strategy that consisted of tens or hundreds of pages of technically-oriented diagrams and words and which took months to develop.
The latest generation of strategy can be formulated in a few days and summarised on one page. It's easy for executives to understand, explore and remember, and apply to their everyday decisions.

The Corporate Strategy for IT

This straightforward strategy has three sections: the strategic Promise (the business outcome the strategy will achieve); Key Principles (basic truths which apply to every IT-related decision); and Core Tactics (the main things the company will do to execute the strategy, given the environment in which it must succeed).
Although each strategy is unique to the company it belongs to, all have some comparable features. It is a bona-fide corporate strategy, not that of a technology supplier or a group of technicians. With a promise to create maximum value from exploiting IT, and not just deploying IT that enables value to be created, its first principle recognises that IT on its own delivers no value.
Whereas traditional IT strategies were mainly about technology, the IT department and IT suppliers, the new strategy focuses on the people who shape, source and exploit the company’s IT investments. Calling them ‘shadow IT’ exposes a mindset that is at odds with today’s reality, and risks further marginalising the IT department from everyone else.

What Will Happen to the Corporate CIO

Individual strategies for exploiting IT have already become integral to broader business strategies, and in this new context the value of having a corporate-level CIO needs to be discovered all over again. The role will adapt and evolve, potentially into something very different and even more valuable than before.
For example, I was recently with a US-based multinational company, helping them define their strategy for optimising the portfolio of businesses they have acquired over the past few years. The promise of this strategy - its value proposition - is to enhance bottom-line performance by better sharing common capabilities but without building a shared services monolith.
The company set out with the idea that it might need a corporate CIO, but everyone is struggling to see the value of having one. Instead, the solution they are now exploring is to have a global Chief Technology Officer (CTO) responsible for technology architecture and service delivery and reporting to the COO. In place of a corporate CIO they are looking to appoint an executive leader of investments in change. He or she will be accountable for the total return the company gets from all the changes it invests in, whether or not those changes involve IT.
Similar models are emerging elsewhere, as executives realize that their historic issues with IT investments are a symptom of more basic problems within their culture of investing in change. However, these are problems which many traditional CIOs do not appear motivated to or qualified to resolve.
These are strong signals for CIOs to focus the strategic IT conversation on exploiting technology investments in the context of value-creating business change - and to keep the strategies they are leading both meaningful and simple.

In this way, the CIO can emerge as her company’s strategic investor in change, rather than become marginalised or obsolete - provided of course, that CIOs today grasp and bend the golden opportunities that developments like ‘shadow IT’ and Web 2.0 have to offer.

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This is an edited and updated version of the original article, which was commissioned by CIO Magazine and published on 5^th September 2007.

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