Managers: try this experiment. Unplug your organisation’s email servers for an hour and listen to the complaints of workers dependent on internet communications as critical part of their daily jobs. Few senior execs would deny that effective use of information and communications technology (ICT) has become vital to their organisation’s ability to function day-to-day. That’s just one aspect of the ICT infrastructure – an infrastructure that has become the dial tone for business: if it’s not always on, the business stops functioning efficiently.
This reliance on technology is increasingly pervasive. The proof lies in IT spend which continues to shift skyward despite the downwards trend of technology costs. According to research firm IDC, Australian and New Zealand organisations were shelling out on average two percent of their turnover on ICT just over 10 years ago. Now it’s more likely to be twice that amount. In some industries, these costs tot up to five percent or more.
In short, ICT is now critical to the efficient functioning of an organisation and, increasingly, accounts for substantial portion of its running costs. ICT has become an enabler for competitive and strategic advantage.
The ability for organisations to offer products and services to their customers around the clock has driven customer expectation. Those who don’t meet the grade will lose out to technologically smarter competitors proffering better and faster service.
But as fast as new ICT stuff provides organisations with competitive advantage, those innovations become entrenched as industry norms. Imagine using bank that doesn’t provide 24×7 internet access. Yet internet banking is less than 10 years old. What started as an innovation in customer service is now firmly entrenched expectation. Organisations failing to either see these innovations emerge or implement them appropriately pay high price.
Small wonder then that executives fret over how to ensure their ICT investments deliver what the business needs both now and in the future. Those that get it right can reap hefty competitive advantage: lower costs, increased flexibility, improved productivity and better customer service. Those that get it wrong risk market fizzle and fade.
When IDC quizzes senior ICT executives in New Zealand and Australia each year in its ‘Forecast for Management’ survey, it wants to know what they see as their biggest challenge over the next 12 to 18 months. Respondents in New Zealand consistently rate “aligning ICT with business” as one of their top three bugbears.
Yet, the sorry truth is that, for many senior executives, the link between the two is not altogether clear.
How can CEOs ensure their ICT investments provide maximum returns? How do they pick which projects should proceed and which ones bite the dust? How to provide an ICT infrastructure that not only ensures reliable ICT dial tone to conduct current daily business but also beds in compelling strategic or competitive advantage?
Media stories abound of the organisations that got it wrong – of ICT projects massively over budget, tad too tardy in delivering the goods or not fronting up with what the business needed. But there’s less information about those companies that get it right and how they do it.
So we asked three ICT-savvy organisations for their tricks of the trade. Keen to get representative sample of New Zealand business, we approached one large corporate (ASB Bank), medium sized corporate (Pumpkin Patch), and one government department (LINZ).
We asked their chief executives and chief information officers to give us their tips on how to ensure an ICT strategy aligns with business needs and delivers bang for buck.
We also talked to industry consultant, Garth Biggs, executive director of the HiGrowth Trust, an organisation set up by Government to help grow New Zealand’s ICT industry. As former CIO of Air New Zealand and past-CEO of Genii, his experience straddles both worlds. He now divides his time between running the HiGrowth Trust and consulting to senior executives on implementing effective ICT strategy.
Step to success
Imagine, we said to Biggs, that you are newly appointed CEO or CIO of an organisation. How would you know whether the organisation’s ICT strategy was aligned with the needs of the business?
His answers form handy checklist to ensure that an ICT strategy is on the right track. First, he said, check the power connections. Reporting structures are critical to establishing good communications.
Research shows that only half of Kiwi organisations have their CIOs reporting directly to the CEOs. “So the first thing I’d do is find out who is responsible for reporting on ICT issues to the CEO,” he says, “and ask them to spend 20 minutes off-the-cuff telling me what’s happening with the organisation’s ICT projects. This gives me sense of how strong their understanding of ICT issues is.
“Then I’d sit down with the person who heads up the ICT division and get them to give me run-down of the organisation’s strategic goals and challenges from business perspective so I can see how well they understand the organisation’s business needs.”
From this, Biggs can get sense of how well the business management and ICT management teams are communicating with each other. Any gaps in understanding on either side sound loud warning bells. He also looks for evidence that the CIO is getting out and meeting regularly with business stakeholders, and is well-versed in day-to-day business activity as well as future strategic business objectives.
He says CIOs should report directly to CEOs. If there’s bottleneck or communication block between those responsible for setting ICT strategy and those responsible for setting business strategy, alignment of the two is problematic at best. Indeed, he says that as prospective CIO he would never consider position that didn’t report at CEO level.
The next step, says Biggs, is to investigate the organisation’s level of ICT maturity. He has simple model based on Maslow’s hierarchy of needs.
Biggs’ hierarchy of IT needs suggests there are three levels at which ICT operates within an organisation. At its most basic, it is essential for ICT to provide stable and reliable infrastructure – the dial tone the organisation needs to transact its daily business.
Unless this basic level of ICT operational stability is met, it is difficult or impossible for the organisation to move up the needs hierarchy. Failures at level one relegate the organisation’s ICT strategy to the realms of market reactivity.
“I’m not saying,” says Biggs, “that an organisation can’t implement projects at all of those levels simultaneously. But unless you ensure the base-level infrastructure is sound, it’s pretty hard for ICT to become an agent of change and move to improving operational performance or providing competitive advantage.”
In order to assess the organisation’s level of ICT maturity, Biggs interviews key business stakeholders about how well the existing infrastructure is meeting their needs.
He also conducts sanity check where he:
• Benchmarks ICT budgets and expenditure against industry norms (figures are available from research companies such as IDC, Gartner and Forrester).
• Looks at key performance indicators such as system uptime and reliability, customer satisfaction, and the track-record for project management and implementation.
• Checks for the existence of solid and effective governance framework for selecting and managing projects.
• Compares the organisation’s ICT maturity against that of similar organisations or competitors.
A solid framework for selecting, prioritising and managing the organisation’s ICT work schedule is critical, says Biggs. “I raise red flag if I don’t see evidence of good processes and procedures in place.”
It’s also important for the organisation to involve business managers in owning and driving projects – that’s key to ensuring alignment between these proje
