This post is tied to the earlier entry about the question the CIO has to answer. For the CIO that question revolves around the role of IT, the business value of IT and its contribution to the enterprise express the essential question that CIOs face. The answer to that question shapes business expectations of IT and its role in the strategy.
Every executive has to answer a question about the resources they manage and the return they generate for the enterprise. Taken together the answers each executive provides defines the dynamics of the enterprise to deliver its mission and compete successfully in the marketplace.
When CIOs are asked the question about how IT contributes to enterprise, CIOs often point to IT the IT infrastructure and Project Portfolio as their answer.
It’s a good answer, but its one based on activities – what IT does. By talking about the technical architecture, the systems they manage, the budget they manage the CIO give the impression that managing it all about managing expenditure.
Don’t believe me? Think about the reasons given when the CIO reports to the CFO.
Answering the question this way positions IT’s as distant from the core business model and not central to the enterprise’s business model.
The best answer I have heard from a CIO was: How will the company deliver these results at speed and scale?
The enterprise needs both.
Speed comes in terms of the rate and stream of business value coming from the IT investment portfolio. You can measure and communicate this based on the value of the business cases approved in the IT plan. How many millions of future dollars does that represent? How quickly can the company get access to that stream of value – the answer is in terms of how IT brings speed to the company.
Scale refers to the efficiencies gained through leveraging technology in business operations. Companies need scale to drive profitability, free cash flow and preserve capital. IT delivers scale in terms of the infrastructure and operations that handle large transaction volumes, protect the company through automation, and reduce the resources required to do business today, freeing resources for the kind of business you want to do in the future. Answer the scale question by looking at the historical costs and volumes of doing business. If the volumes are rising, but cost staying about the same or rising slower – then you are creating scale. This measure is only available through reporting historical performance as you can say “If we did things the old way, our costs would be $ more than they are now.”
You can keep the current expenditure based answers about the CAPEX and OPEX you manage and continue to receive strategic direction from the other executives. This post suggest that there is a different answer, one that reflects what IT really does in the business, rather than what it does to the budget.
Speed and scale form the basis for the answers CIOs should give. They are the basis for the answers that will get you to the top table because every other executive needs to execute their plan with speed and needs to operate their business at scale to be successful.