Achieving and Sustaining Business-IT Alignment involves IT investment planning; unfortunately, traditional methods of going about this exercise, which is typically based on projects, doesn’t work anymore because technology is being delivered in more places and digital businesses are investing more in technology. In this article, we’ll give C-level executives a rundown of how to plan IT investments based on how much value they will bring to their digital business goals.
C-level executives are under more and more pressure to help their companies reach their digital business goals via achieving and sustaining business-IT alignment, and very few would debate how vital it is to modernize IT and implement new technology as part of a successful digital transformation. For example, Gartner’s 2022 View from the Board of Directors Survey found that 58% of directors and C-level executives cite digital tech initiatives as one of their top three strategic business priorities for the next two years.
Business leaders are also putting more money into technology for achieving and sustaining business-IT alignment. For example, over 75% of the $1 trillion of value in the cloud is in accelerated product development and growth from new and better use cases.
To meet these expectations, C-level executives must make sure that IT investments are in line with the digital business goals of their organizations. Digital business acceleration is made possible by teams of people from different fields who work together to make products instead of projects. A recent study from McKinsey found that close to 700 technology leaders showed how deliberate they are in grounding tech initiatives via key process indicators (KPIs) for progress and business objectives and key results (OKRs).
As organizations move to a model of delivering services based on products, traditional ways of planning IT investments don’t match investments to the most important outcomes, and thus, don’t make progress toward effectively achieving and sustaining business-IT alignment. Since there are almost an infinite number of ways to invest in IT, it’s hard to sort through all the noise to find and put high-impact projects at the top of the list. Also, the rise of technology teams that are spread out across the business makes it more likely that they won’t agree on what strategic investments are or how to define value.
Some mindful questions to ask CEOs and other C-level executives include:
- When reviewing proposals for IT transformation, do the business outcomes of each project stand out?
- Do IT costs include the cost of tech debt, and is that cost taken into account when deciding how to spend money?
- Do you fund big, long-term projects every year based on what you’ve accomplished?
In response, the best C-level executives are planning IT investments with a focus on value and teaching business partners how to make the right IT investments on their own. Next, we’ll go over four of the most prominent key ways that top executives make sure their IT investments pay off and they are on the right track toward achieving and sustaining business-IT alignment.
1. Align Business and IT Funding
Instead of basing IT investment planning on a list of projects, progressive CIOs talk about customer priorities or business capabilities when talking about investments. Business capabilities, value streams, and customer journey maps are all structured ways to show what an organization does to get where it wants to go.
Without clear business and IT alignment on strategic priorities, IT often has to cater to many stakeholders, which means that different parts of the organization ask for IT support in different ways. The problem gets worse because functions tend to make business cases that are too optimistic about costs and returns, and internal fights break out to get IT funding.
As a result, the CIO has to spread resources across many, often unrelated, projects. This makes it almost impossible to put money into the larger, cross-functional projects that create cutting-edge platforms and architectures, reduce tech debt, and help the organization as a whole. This misalignment of business and IT also means that there isn’t always a way to reorder projects and make hard but important trade-off decisions.
There are a number of ways that boards and CEOs can help solve this problem. First, they need to agree on what the business’s long-term goals are. Even when talking about customer or business value, CIOs will find that different business partners have priorities that seem to be at odds with each other.
2. Attract Tech Talent, from Top Engineers to C-Suite-Level Executives
McKinsey research shows that focusing on people and talent is one of the best things a business can do, but talent strategy isn’t one of the top things companies do. Boards and CEOs need to change this by looking at how to attract and keep talent as a whole, not just how to hire people.
This starts with making tech a bigger part of the business. Having the CIO report directly to the CEO or even bring the CIO onto the board sends a strong message about how important tech is. About 57% of the best IT companies say that their senior leaders are very involved in strategic planning, while only 17% of the worst IT companies say the same.
The other area where boards and CEOs can have a big impact is in hiring the right kind and number of people to make a tech transformation work. Boards have usually focused on filling C-suite and senior management positions, but digital businesses depend on top engineers to make the needed changes. In fact, the best engineers are at least ten times more productive than those who are just starting out. It can’t just be a matter of hiring a few people, because that wouldn’t be enough to get a critical mass of talent. Because of this, top talent is often frustrated by organizational inertia and either quickly leaves or changes its behavior to fit the way the organization has always done things.
To find this talent, CEOs and boards can help by removing typical HR restrictions that slow down the recruiting process, pushing for new ways to advertise and find talent, and holding HR accountable for meeting KPIs on hiring and churn.
3. Check the Health of the Information in KPIs to Find Investment Opportunities
Even when IT investments are made in the right places, it can be hard to find the specific opportunities that have the most impact. Relying on business leaders to come up with project ideas or evaluating ongoing investments once a year can lead to blind spots where important IT investment opportunities are missed. To deal with this problem, forward-thinking CIOs keep an eye on the information that shows how well key business functions are being supported by existing IT investments.
Evaluating the quality of the information used to evaluate a business’s capabilities is one of the best ways to find opportunities that could help the business do better and provide more value. Poor information health of KPIs is linked to problems in business processes, collaboration, integration, or usability, which could be fixed by investing in IT. Information health analysis helps find important opportunities that might not be seen otherwise.
Business leaders can be asked to rate the information health of business KPIs on a regular basis:
- Are the KPIs best for measuring what they’re supposed to do?
- Is the information correct and free of mistakes?
- Do the KPIs for each capability take into account all of the important factors?
- Is the information current and readily available?
4. Allow Business Leaders to Make Responsible Decisions on IT Investments on their Own
As technology companies outside of IT grow, business leaders are more likely to buy technology solutions on their own. This makes it harder for C-suite-level executives to see where IT investments are being made across the enterprise. Instead of trying to get back in charge, progressive executives support this new way of working and help business leaders make smart, independent technology investments. When they do this, the best CIOs don’t just share responsibility for finding opportunities; they also help business leaders use a value lens to evaluate technology vendors.
For example, giving business leaders guidelines and criteria for judging vendors helps them:
- Describe the business problem that the investment in technology is meant to solve.
- Find out how much the solution will really cost and how hard it will be to implement.
- Assess competing vendors based on how well their strategies fit with the enterprise’s goals and how much risk they are willing to take.
- Sort through sales pitches from vendors to make sure the solution is relevant to their business environment.
In 2020, more than 80% of organizations increased the number of digital transformation projects, according to recent research from Boston Consulting. About 75% of these organizations, though, did not reach the goals of their digital transformation projects.
C-suite-level executives can use these strategies within the framework of achieving and sustaining business-IT alignment to use a value-based approach when planning for technology investments. This will help them move their organizations toward their digital business goals, solidify their role as strategic partners, and enable important business outcomes both inside and outside of IT.
