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We need a good business reason for investing in IT

by Mark P. McDonald  |  January 30, 2013  |  3 Comments

For years CIOs and researchers have highlighted the imperative for IT become a larger part of the business.  The advice offered is for CIOs to be more strategic, business focuses, business relevant and the like have consumed tons of paper, millions of pixels and pounds of toner.

Over the last 10 years the issue of business and IT has been a steady drumbeat in CIO priorities, advice and recommendations. Get a better relationship, spend more time with the business, think like a business leader and play better politics are among the types of sage wisdom and advice.  The problem is that advice has not really worked.  That advice is only half right and the back half at that.

Over the last ten years, business and IT relationships have changed for a few but many still put an ‘and’ between the two.  The issue is not the advice is wrong rather it is that there is a missing ingredient in that advice.  It is only half right, and the back half at that. The front half of that advice is why would executive peers support an expanded role for IT.

What is the good business reason behind changing the relationship and role of IT?

The presence of a good business reason almost always guarantees success, but when absent turns good ideas into nothing more than a charm offensive or power grab.  A good business reason is not an ‘elevator pitch’, nor it is an IT marketing campaign, nor a single transformational/transient program business case.  Rather it simply the rational for investing in Technology – not IT – in order to raise business performance and achieve strategic objectives.

A good business reason is the reason why IT is part of the business

For many organizations there has not been a good business reason to for better integration of technology and IT into the enterprise for more than 10 years.  The evidence of a lack of a good business reason is everywhere from a decade of devaluation in IT budgets, to the inability of IT organizations to get the right skills, to the massive growth of outsourcing, to the general in effectiveness of management practices for benefits realization, prioritization, execution and management.

The lack of a good business reason for IT is part of a quiet crisis facing IT as an industry, an organizational unit and as a career.   At a reception when my son graduated from college a few years back the department chair was going through where the graduates were going next, graduate school, a job in a bank, a job in an oil company, etc.  Each met with various levels of applause, but when he mentioned that my son was going into IT there was silence.  It was as if going into IT was like going to prison.

Without a good business reason, IT has become insular in its outlook. IT has become functional in its orientation.  IT has become a cost of doing business part of SG&A expenses rather than central to the company’s revenue and margins.   In the 2013 CIO survey, CIOs reported that on average enterprises realize only 43% of technology’s potential.  43%! After years of investment, major operating budget outlays, blown products and new the technologies IT’s average score doesn’t even rate a grade of D.

In explaining the reasons behind this grade, CIOs assign blame to the business as a primary source of waste, limited business benefits and low rates of technology value.  It is a little like a child blaming their parents when they fail. While that maybe true, or not, the bigger question is where do you go from here?

It is apparent that we need to go back to the core, the foundation the good business reason for having IT.

Digital technology and a good business reason

The good news is that after years of walking in an innovation desert, there are new sources of a good business reason for IT.   Digital technologies provide a foundation upon which to build a good business reason for technology and IT’s role in creating value and results from those technologies.  Notice I did not say, analyze, design, implement and run.  Those are activities and a good business reason always concentrates on the result.

Developing a good business reason to invest in technology and therefore in IT comes from understanding the fundamentals of how your organization creates value for customers, shareholders, constituents, associates etc. You can also look to the persistent needs and challenges that face your organization and industry – how you deal with them is another potential source of a good business reason.  Finally you can look at your performance profile, the effort required to do things like find prospects, generate sales, serve customers, develop new products, expand market reach.  These operational outcomes represent potential business reasons to achieve and sustain new levels of performance through technology.

Avoid getting caught up in the business cases of individual projects that too often involve cost take out, rather look at what is necessary to generate top line revenue, gross margin, the customer experience, etc. Avoid applying new digital technology as the reason for the investment, replacing paper with iPads is cool but its not a good business reason unless it changes business performance, opportunities, customer experience or growth.  Avoid platitudes about ‘technology for competitive advantage’ or ‘technology is innovation’ none of that goes into the bank and making ‘bank’ is always a good business reason.

What is your good business reason for investing in technology?  If it does not immediately come to mind or it is so generic as to apply to anyone, then it may be time to go back to the drawing board.  Draw up a good business reason before sketching out the strategy, before putting program plans on paper, before optimizing your organization because changes are that while you are doing things you may not be doing them for the right reason.

What is the good business reason for technology in your organization?

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Category: 2013  digital-edge  digitalization  re-imagine-it  strategy  

Tags: it-and-business  it-leadership  strategy-and-planning  

Mark P. McDonald
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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