How can a Center of Excellence become strategic? We’ve 0000ff;">0000ff;">previously discussed where strategic benefits come from (generation of business value) and we’ve learned the reasons behind why a CoE does not act strategically (lack of alignment between technology strategy and business strategy, lack of measuring business value, and an inability to speak the language of the business). Now, we need to do something about it. What must be done to become a strategic CoE?
A company begins to align the technology strategy with the overall business strategy by doing three basic activities:
1) Ensure the CIO (or CTO) has a full seat at the executive table
In today’s information-rich environment, the ability to gather, capture, sort, and present information is of strategic importance for any enterprise. Information is a strategic asset. When technology matters are relegated to an executive who may not appreciate all of the considerations related to technology, the likelihood of missteps increases. It is important for the CIO to participate in corporate decision-making and strategy sessions.
2) Strengthen the business relationship between Finance and IT
Too often, the relationship between Finance and IT devolves into an adversarial relationship where Finance is always pointing out that costs are too high or Finance becomes the “People Who Say ‘No’”. (Don’t be offended, I am an accountant by training and I’ve been called worse).
In reality, the Finance organization can become a strong ally because they have information everyone pays attention to: numbers. Working with Finance helps to develop strategic thinking if the focus turns to showing how technology investments help achieve a business objective.
3) Formalize the constructs between the technology strategy and the corporate strategy
It appears as if ignorance is a common reason as to why some technology projects get approved. It rarely is on purpose or deliberate but, more likely, lack of awareness. Technology strategy aligns to business strategy when the links between the two are clearly defined and articulated. Be sure to clearly define how technology is being used to meet the business objectives.
A well-managed technology strategy aligned with corporate strategy increases the likelihood of technological innovation that can give a business a competitive advantage. Based on research and studying I have done, companies report that increased alignment between IT and business occurred once IT’s role in business planning and strategy increased. Why? Because the two parties are moving in the same direction.
The solution for the lack of measuring business value is the easiest to describe but appears to be the most difficult to achieve. I believe much of this is due to the ‘Ready. Fire. Aim.’ culture of organizations today. The pace of business continues to speed up and there is no time to measure. ‘Must keep moving’ becomes the mantra. An organization can begin to measure business value by:
1) Using the business case to measure value once the program starts
A business case is almost always prepared in order to secure the capital funds. Benefits are identified; costs are considered; return on investment is calculated. Once complete, the business case is usually tossed in a drawer and never again sees the light of day. A strategic CoE begins to use the business case as the document that defines and measures value generation. A baseline level of performance should be established at the outset and re-measured at regular intervals (for at least a year) once the project has been delivered.
2) Develop a standard set of business metrics used across the enterprise to measure business value
The beauty of a standard set of business metrics is that the entire enterprise agrees on the definition of ‘value’. Once these metrics are established, all projects are stated in terms of these value drivers and a business case is built only on these items.
One company that did this went throughout the enterprise and developed a set of 19 distinct metrics that defined value. They were a mixture of financial, headcount, and productivity measurements. The key point is that all leaders – in all areas of the company – agreed that these metrics measured business value. From that point forward, some combination of the 19 measurements was included in each business case.
When an organization really begins to measure business value then cost savings is no longer the sole focus of technology investments. Business value is created through top-line growth as well as through bottom-line impact. As the organization shifts to quantify business value, a corresponding shift in the perception of the IT organization from cost center to value center occurs.
Developing the ability to speak the language of the customer is a combination of organizational change and education. A company starts to develop this capability by:
1) Moving key solution design and business relationship roles into the business organization
I continue to be amazed when I work with companies where the Center of Excellence has very little contact with their business customer. It is getting rarer, but I still see it. More common is the ‘Us’ versus ‘Them’ perspective between business and IT. More interaction and collaboration is needed, not less. Moving key design and relationship roles into the business organization allows for active participation in multiple aspects of the organization’s operations. This movement creates a greater understanding of what the real issues are and why the issues are there in the first place. Done well, the line between business and IT resources becomes so blurred; there is no longer any differentiation.
2) Include business training as part of the formal development plan for IT resources
Business-centric training usually happens in one of two ways: Either a person grows up in that environment and learns by doing or they learn the business side through an implementation of technology. Most IT resources learn by the latter approach and lack a solid understanding of the business principles. Consequently, it is important to train resource in the deeper principles of business process in order to be able to communicate with the business customer and ultimately, design better business solutions. A resource does not need to become a PhD in an area but gaining a deeper understanding and appreciation of the business area. The resource must be able to communicate to the business customer in business terms, not technology terms.
3) Develop a strong partnership between Finance and IT
Remember, the accountant is your friend. The key point is to teach resources the financial principles for all aspects of their responsibilities. When an individual understands the financial impact of what they do, it becomes easier to explain the benefits of improving performance.
IT resources begin to better understand the nature of business issues when they see them every day as part of the organization’s operations. As they communicate with the business customer in language they understand, business requirements are framed in a way that both business AND IT understand.
In conclusion, a Center of Excellence can become strategic in its actions and in its relationships be accomplishing the following items:
• Align the technology strategy with the overall corporate strategy
o Provide the CIO with a full seat at the executive table to plan and strategize
o Clearly articulate the strategies so all understand how they fit together
• Define business value in business terms
o Develop a strong partnership between Finance and IT
o Finance can help drive the concept of business value through common metrics
• IT resources speak the language of the business
o Move the business relationship and key designers into the business departments
o Allow them to be active participants in various department operations
An unyielding focus on continually delivering innovative solutions that generate business value is what sustains competitive advantage and allows a Center of Excellence to act strategically with its business partner.
Do you know of a CoE that desires to act strategically? We can help. I am a Principal in SAP’s Industry Business Consulting Group. I can be reached at firstname.lastname@example.org with questions and comments.
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