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At a recent executive summit, I presented a historical perspective of IT spend layered across our enterprise business capabilities. The story was consistent; technology investment drives significant business results. There was a direct connection between IT focus and business outcomes. The relationship highlighted the importance of being aligned with strategic needs and underscored the CIO as not only the chief information officer but more importantly the company’s chief investment officer for technology.
Technology investments make or break your enterprise and IT is at the front lines on every technology investment decisions. These investments drive and enable enterprise aspirations for scale, growth, and value creation. But how does he/she know which investment and resource allocation maximize business return?
To maximize outcomes, CIO’s rely on top-down and bottom-up investment approaches. Top-down is understanding enterprise long-term strategic intent. This approach ensures business alignment and leadership commitment—key attributes required for success. Bottom-up analysis involves the introduction of new ideas involving transformational technology that can ultimately drive strategic change within the company. Your organization, leadership teams, and metrics must align to these two methods. Portfolio management decisions must also avoid the trap of uniform distribution. In short, the chief investment officer for technology runs his portfolio like a business.
Every enterprise has a strategy. Some are easy to define and follow while others are less obvious and can only be derived from actions and culture. Regardless of strategic planning rigor, it is the CIO’s responsibility to know where the enterprise is placing big bets. Strategic alignment is about ensuring that you’re investing in the right things. Technology investments and IT resource allocation are driven by knowing where the enterprise wants to win. Without this understanding, IT wastes capital and resources on misdirected non-value initiatives losing a competitive advantage.
For the CIO to invest properly we must be an active listener. We need to digest feedback, engage pro-actively and connect with our business peers. At The Pasha Group, quarterly executive meetings are not only an opportunity to learn about strategy and planning but to connect and build relationships with other leaders.
A very powerful tool to increase collaboration and transparency is the business capability diagram. Business capability modeling is a graphical representation of enterprise functions including detailed business capabilities. Business capability is the language of enterprise leaders and should be the CIO’s second language. As an example, the service cloud deployment is represented as an investment in our servicing customer capability. When I present from a business capability perspective, my peers appreciate the scope of IT engagement and ‘why’ technology investments are prioritized. Modeling the enterprise with capabilities and layering technology investments, allows executive leadership and the business to directly connect their work with IT investments.
Once the strategic direction is understood, CIO’s can actively design plans based on the intended end state. Plans will drive investments, resource allocation, and business outcome metrics. Plans are further leveraged to define organization structure, talent, and sourcing strategies.
The bottom-up portfolio investment is the high risk/high reward category. In this investment category, the CIO leverages disruptive technology to completely redesign processes or create new customer value opportunities. Often these technologies do not have a history of business deployments and your engagement may result in a pioneering business use case.
Third-party logistics and supply chains are on the cusp of many disruptive technologies. Real time updates, simplifying customer experiences, routing decisions, asset management, and utilization are driving investments in artificial intelligence (AI), internet of things (IoT) and blockchain. Disruption will transform business models and test organizational agility. At The Pasha Group, we are experimenting with many platforms to improve operational effectiveness and customer value. This category is not necessarily about aligning with strategy but rather inventing the strategy.
Disruptive investments can be costly because they require attention and nurturing. The CIO cannot outsource their management and oversight. They are generally not self-propelling but instead need IT vision and active engagement.
"When the CIO and business work in concert, smart and strategic investments can be made resulting in happier customers and a more successful business"
Avoid the Trap
A common fatal trap of portfolio management is the peanut butter approach, where technology investments are spread evenly across an enterprise. Often this approach is branded continuous improvement or continuous delivery of enhancements—basically customizations. Spreading technology evenly saps resources and capital drawing resources from real value generators. This approach gives the impression of a balanced portfolio but in reality only appeases competing interests, quieting noise but reducing overall business results. Using a baseball analogy, the top end of the batting order is stacked with the best hitters, they get more swings, and score more runs. Pick the big hitter initiatives and score!
Clearly, the CIO is the chief investment officer for technology. No other person in the company is better positioned to understand which technology will best meet the long-term goals of the business. Understanding this is critical for business success. If the CIO is not informed of business objectives or if the CIO is a passive observer, poor investments will be made and the enterprise will waste resources on misaligned technology and lag behind competitors. On the other hand, when the CIO and business work in concert, smart and strategic investments can be made resulting in happier customers and a more successful business.