The prior post concentrated on definition the future of the CIO as having responsibility for the enterprise-operating model. It is all well and good to stake out a new territory, but its all just words until you are able to back it up with organizational structures and resources. That is the focus of this post.
A meaningful discussion about reorganizing or creating resources requires starting with the intent of the reorganization, otherwise the proposal is just a land grab and likely to fail. So here goes.
There are three basic functions performed by every enterprise.
- First, the enterprise is an economic engine that creates value for customers and shareholders by delivering on its value proposition, achieving its goals and executing its strategic plan. That is the primary function of the ‘line’ or front office organization what people in IT call ‘the business.”
- Allocating resources, monitoring their progress and exercising oversight are the second major function within every enterprise. These activities are the domain of the corporate functions and executive team — including the Board of Directors.
- Evolving the enterprise for its future viability and value is the third function performed by every enterprise. Currently this is the domain of a series of ad hoc initiatives, investment cycles and other temporary activities.
The focus of this post is on this third function — the evolution of the enterprise. The temporary nature of transformation was acceptable as long as change was seen as an event and individual change initiatives created step level changes in performance. Unfortunately the nature of change is changing, moving from one of individual steps toward one of continuous evolution that requires a different organizational structure.
Without a re-organization that assigns resources and responsibilities for evolving the operating model, change will continue to be sporadic, risky and disruptive. These are the resources CIOs need to actively manage the operating model.
Yes I am talking about an organization having three major operational areas: The Line, the Back Office (oversight) and Enterprise Capability (evolution)
So what is in an enterprise capability organization? The resources required to define, build and sustain how the enterprise works defined by its capabilities. A capability is the resources an enterprise uses to create outcomes and it embodies the combination of process, human capital, technology, information and culture. The following post highlights the aspects of a capability LINK.
An enterprise capability organization consists of three main groups, shown in the figure below. These groups combine resources that were previously scattered across corporate development, human resources, business units and IT. They are brought together around the idea of what is necessary to address the complexity and required integration to create lasting performance. The three major groupings are:
- Capability Development – which supports ‘changing’ the business by developing new enterprise capabilities or transforming existing ones. This group includes functions like Corporate Development, as M&A and partnerships have become critical sources of capability. IT also combined business process improvement, job design and application development to reflect the integrated role each plays n the way we work
- Capability Services – supports ‘how we run’ the business in terms of the business and technology services that need to be delivered at scale and with high quality across the enterprise.
- Capability Performance – monitors and continuously improves the performance of current capabilities, indentifying the need for new capabilities and deploying them. This is an active group that is responsible for intervening in local operations in order to raise performance. In support of that role, this group includes the training function from HR as poor performance is due to a limited understanding of jobs or poor skills.
These major groups are works with capability owners, the CEO and CFO to execute the strategy and improve the operating model. Taken together, they are a focused group of professionals with a defined and critical role to play. Details around this model can be found in an article published in the MISQE in 2007 entitled “The Enterprise Capability Organization.” Sorry but a subscription is required.
The move to an Enterprise Capability Organization reflects a natural progression based on the scope of results and the business objectives. I know that you have all seen these ‘evolution path’ graphics before — like the one below. But it does represent a progression that IT has experienced over the past 30 years. I fully recognize that a capability organization is a stop on the evolutionary chain, but it seems to be an important one.
CIOs cannot recognize their enterprise relevance by looking at the core rational for only IT. They need to recognize and connect with the core functions of the enterprise in terms of delivering current commitments, governing the enterprise and transforming it for the future. Taking that view requires looking at the resources and responsibilities required outside of IT. That defines the new structures that match a new role for the CIO.