In recent discussions with CIOs, we observed that one key to communicating the business value of IT is to focus on how IT’s actions/activities impact business performance. Although it is important to have metrics that measure the IT organization’s performance, it is more important to have common metrics that are used by the enterprise and demonstrate how IT contributes to the business’s revenue, profit or market share growth, cost management (beyond IT) and competitive advantage.
CIOs have struggled with how to best articulate IT’s contributions to the enterprise. The IT organization (ITO) is typically perceived as a cost center, versus a revenue generator; and CIOs are constantly asked why IT (and ITO) costs are so high. The problem is not what the ITO is doing, but how what it is doing is being communicated. In the book, “The Real Business of IT: How CIOs Create and Communicate Value” (by Gartner Vice President and Distinguished Analyst Richard Hunter and George Westerman of MIT, Harvard Business Review Press, October 2009), a majority of the CIOs interviewed were thinking and acting in remarkably similar ways.
Successful companies start the process of articulating business value by changing the way they think about IT and changing the language they use to describe the initiatives they are working on. For example, a healthcare\care delivery organization (CDO) in the Southeast U.S. recently hired a new CIO from outside the organization, and one of the first things he did was to stop referring to “IT projects.” Instead, he insisted that all projects be referred to as “business projects” and delivered this message to everyone, from his direct reports to the board of directors (BOD). By doing this, he immediately changed the conversation and stopped the questions about why the ITO was doing certain projects. IT projects are now defined by their contribution to the business (for more on how to change the conversation, see the Gartner Research Note “Stop Talking About ‘IT-Business Alignment’ Now, and Start Talking About Business Performance” below).
Another CIO, whose company provides IT services to the oil and gas industry, faced challenges when debriefing senior executives on the state of IT. The information provided was highly technical, which made it difficult to understand and “make actionable.” His solution was to emphasize “what the business cares about most, so I began converting the language in some of my reports and presentations to terms that embodied the cost of a barrel of oil. Suddenly the senior executives became more engaged because they could directly relate to the business issues and the language.”
Another CIO who changed the conversation was a U.S. Mid-Atlantic retailer who recently implemented a new point-of-sale (POS) system and replaced dozens of dial-up lines with broadband access in all the company stores. “But instead of talking about the systems and the technical infrastructure changes I made,” he says, “I spoke about how these changes enabled us to service more customers, increasing the number of transactions and throughput in each store, and ultimately increasing revenue per store.” These initiatives thus became an investment in IT that resulted in a return to the business, versus being a cost (see the Gartner Research Note “Business Performance Is the Value of IT” below).
CIO CALL TO ACTION
To be successful in communicating the business value of IT, CIOs must change the way they communicate with their business colleagues. The following are some proven practices for doing so:
• Talk in the language of the business: There is no such thing as an “IT project.”
• Frame everything in terms of business performance and business outcomes: Network availability is not a business metric.
• Don’t talk about IT “aligning with the business:” IT is the business, just like sales, finance and HR.
CIOs must better communicate their IT initiatives in a manner that is meaningful to their business executive colleagues. Changing the conversation about IT to one that is more business- and outcomes-focused will raise the credibility of the IT organization and should create a lingua franca that helps the enterprise exploit IT developments more quickly and successfully.
As CIOs focus more on creating, developing and communicating business value, enterprises should be able to boost their agility. The more rapid, focused adoption and exploitation of IT should improve business performance and outcomes by further mitigating and managing risks, and supporting better strategies and financial management.
“The Real Business of IT: How CIOs Create and Communicate Value” (Book – Richard Hunter and George Westerman, Havard Business School Press, October, 2009).
“Stop Talking About ‘IT-Business Alignment’ Now, and Start Talking About Business Performance” (Research)
“Gartner Business Value Model: A Framework for Measuring Business Performance” (Research)
“A Simple Framework to Translate IT Benefits Into Business Value Impact” (Research)
“Business Performance is the Value of IT” (Research)