Three Tips to Align Business & IT Strategies

christchurch earthquakeAt daily, emergency management briefings in the aftermath of the Christchurch, N.Z., earthquakes, the police chief complained that officers were overstretched due to the amount of burglaries of empty houses.

The police force had no way of knowing which houses were deserted following the quake, he said.

But the CEO of the power company thought about it for a moment and then realized he knew because they had a list of houses where the power had been cut off.

Then came a new realization, according to Prof. Joe Peppard: “He always saw data as something that could be used to run a business. He didn’t realize data could be monetized.”

Speaking at the Irish Computer Society (ICS) last week, Peppard was kicking off a new round of his CIO Masterclass Series. (More posts on his talks can be found here).

Director of Cranfield’s School of Management IT Leadership Program, Peppard’s first talk was called Achieving IT-Business Alignment: The first steps towards strategy co-evolution.

“It’s not rocket science,” Peppard said. “But it still seems to be one of the top three issues” among CIOs.

However, Peppard identified one gap in business thinking that can cause companies to struggle with strategy or miss opportunities to innovate using IT. That is the gap between Information Services (IS) and Information Technology (IT), he said.

It is important to make the distinction, Peppard said. Companies must first look at IS strategy. This is demand oriented, information focused and business based — and has nothing to do with technology. An IS strategy should be drawn up by the business side and should deal with information and its manipulation, use and sharing.

And there were plenty of hugely successful CEOs to quote on the value of information, Peppard said.

Bill Gates: “The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”

Fred Smith, Founder of Fedex: “The information about a package is as important as the delivery of the package itself”

Only then can an IT Strategy be drawn up to align with business needs. This is supply oriented and technology focused, Peppard said. An organization typically has just one IT Strategy but can have many IS Strategies, he said.

An example would be a large multinational with several divisions. Each will have an IS Strategy but those will be underpinned by a single tech strategy, Peppard said. “But a lot of organizations often don’t recognize that.”

Peppard said he studied one company that had a strategy of acquisitions. The CIO did his job well and ensured the new companies were integrated efficiently. But the CIO reported to the CFO, and was not party to strategic conversations.

This hurt the company when it decided to divest of some units. It turned out the CIO had done his job too well for that to be an easy task.

Achieving Strategic Alignment

Achieving business-IT alignment is “nothing very, very sophisticated,” Peppard said.

  • Use tools business executives are familiar with. These can include Critical Success Factors, Process Analysis or by extending the Balanced Scorecard a little.
  • If there is no formal business strategy, ask each area of the business what their priorities are.
  • It is best to develop IS and IT strategies in parallel.

And the final piece of advice from Peppard: “I believe there should be no executive summary because, if there is, that is all people will read.”

Image courtesy of NZRaw.co.nz on Flickr.