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Three Practices to Shift Business Expectations of IT Beyond 'Run the Business'

Published: 04 January 2017 ID: G00319554

Analyst(s):

Summary

Many CIOs are held back by business executives' narrow efficiency expectations of IT, and want to move beyond "run the business" to deliver on growth and transformation. We offer three practices to jump-start a change in the business perception of IT and to reposition CIOs for innovative leadership.

Overview

Key Challenges

  • For a number of Gartner clients, enterprise expectations of the CIO and the IT department are largely limited to delivering back-office systems and infrastructure services as a cost center.

  • With nearly 50% of IT spend projected to occur outside of the IT department by large enterprises pursuing a digital business strategy by 2020, CIOs need to promote an enterprise view of how information and technology contribute to business outcomes and capabilities, yet few do.

  • Nearly 70% of Gartner clients are between 2.2 and 2.6 maturity levels as measured by ITScore, with expectation focused on back-office efficiency with limited IT involvement in business innovation.

  • Business IT spending without IT involvement can increase architectural complexity, support and future opportunity costs, increasing risk due to lack of focus on security, risk and architecture.

Recommendations

CIOs responsible for bimodal IT adoption:

  • Communicate the business value of IT in business language and outcomes.

  • Create a "living" representation of IT strategy that connects to and shows IT's contributions to business strategy and use it in every executive meeting to visually show the strategic business value of IT.

  • Baseline your maturity level using ITScore and chart a path forward to a minimum Level 3 maturity with a service optimizing delivery model that empowers IT to run like a business.

  • Invest in bimodal IT to explore new island project innovation initiatives in order to prove IT can deliver beyond efficiency.

  • Invest in the IT front office, starting with business relationship management in order to increase engagement with lines of business.

Introduction

Many CIOs take on the role of a competent back-office supplier of IT capabilities and services, operating as an order taker, delivering:

  • Effective project management and execution

  • "Run the business" services such as application hosting and security services in order to keep the business's core critical applications running 24/7 and mitigate risks

For these CIOs, business innovation occurs outside of IT, in lines of business (LOBs) and at the CEO level, engaging IT later in the stage of project request and delivery. CIOs are expected to run the IT business efficiently with two main goals: IT cost optimization and responding to business requests. Governance over business priorities, programs and projects are left to the business with little or no influence by IT.

With digital business at their door or on the horizon for most CEOs, there is a sense of both opportunity and urgency to change this paradigm and move IT to a role that delivers greater business value (see "2016 CEO Survey: The Year of Digital Tenacity" ). Indeed many CIOs are concerned with IT's relevancy if they are not playing a key influencer and delivery role in support of digital business. To do so requires executive partnership and collaboration to drive business success.

In the majority of enterprises, the business doesn't expect more than efficiency so they don't seek IT's assistance to grow or transform the business. Moreover, any attempt for IT to go beyond what's expected is perceived to be an overreach and counter to efficiency, potentially duplicative, and a waste of time and effort; thus, there are strong headwinds that keep IT at the efficiency level. As a result, IT stays centered on delivering to run the business expectations and delivering on project requests and the business thwarts its own efforts to achieve success in the digital age. The basis for low business expectations for IT are almost always related to lack of credibility due to inadequate performance, both of which are a symptom of low IT maturity levels. CIOs pursuing higher levels of maturity can both improve performance, and solve the credibility gap, providing incentive for the business to engage differently with IT in order to achieve business growth and transformation.

One of the measures in the Gartner ITScore maturity model is the business expectations of IT (see Figure 1 and "ITScore for Enterprise" ). There are three such measures: efficiency, enhancement and transformation. These are mapped to required maturity levels and delivery focus. As shown, if the business expects:

  • Efficiency, the IT organization must perform at a Level 2 maturity with a process optimized delivery model (see "Service Management, ITIL and the Process-Optimizing IT Delivery Model" ).

  • Enhancement, the IT organization must perform at a Level 3 to Level 4 maturity and a service-optimized delivery model (see "Running IT Like a Business 2.0: The Service-Optimizing IT Delivery Model" ).

  • Transformation, the IT organization must perform at a Level 5 maturity and a value-optimized delivery model (see "Fusing IT With the Business: The Value-Optimizing IT Delivery Model" ).

Figure 1. Business Expectations of IT Mapped to ITScore and Required Delivery Focus
Research image courtesy of Gartner, Inc.

Source: Gartner (January 2017)

An IT organization that has efficiency expectations will deliver on that through effective process optimization; but it won't move to the service optimizing delivery model because it will increase costs and business value. However, the business won't recognize the increased business value because it is counter to its expectations of efficiency. CIOs cannot expect to do the same thing year after year and achieve different results. If they want to move the needle on business expectations in order to deliver on innovation in addition to efficiency, they have to take action. This research provides recommendations to CIOs to jump-start changing business perception, without fully transforming to a Level 3 maturity first. It offers three top practices to help LOBs view IT in a different, more capable and trusted light within a fairly short six- to 12-month time frame. As a result, perceptions can be changed in parallel to building the transformation business case, thus, shortening the time for CIOs to begin to deliver on growth initiatives. Time is of the essence to do so.

Analysis

Change the Conversation From IT-Centric Outcomes to Business Outcomes and Capabilities

The successful back-office, process-optimizing IT organization focuses on delivery of efficiency and measures itself from an IT outcome perspective such as:

  • Project completions; actual to budget

  • Uptime

  • Process metrics (such as incidents resolved and changes made)

  • Risk reduction (e.g., disaster recovery, compliance, patching and security event management)

  • Financial measures of budget to actual

The common denominator for these metrics are that they are inward-facing — they assess IT performance based on asset- and project-oriented IT outcomes, not business outcomes. The IT organization that wishes to move business expectations to enhancement-oriented must change the conversation to IT's contribution to business outcomes.

One way CIOs can do this is to develop a storyline that connects the business strategy with IT's contributions in language the business understands. For example, many of our clients have used the one-page strategy to develop a pictorial representation of the business strategy and IT contributions (see "The Art of the One-Page Strategy" and "One-Page Strategy Library: Services Industry" ). This helps put everyone on the same page and serves as the foundation for conversations with business leaders on increased collaboration toward shared business goals. This conversation will clearly show that the CIO is skillful in business strategy, and will begin to change the perception of the business leaders of IT. They will start to see IT as part of the business strategy and not just as a supporting technical utility. As a result of connecting IT contributions to business strategy, many CIOs have found an increased willingness for business leaders to more proactively evaluate IT capabilities that could benefit them and improve on the business capabilities to deliver consistent outcomes.

Increased business interest, however, must be backed up by IT capabilities to deliver business outcomes. When an IT organization is at Level 2, it is reactively responding to business requests, and it may not have the resources and skills to address business growth initiatives. Increased interest by the business in IT capabilities can and should result in more strategic discussions on the capabilities IT can deliver, and may even result in a pilot initiative to test-drive those capabilities. For the Level 2 organization, that means that the CIO must already have some strategic resources internally on staff that can deliver to the pilot expectations, at least to prove that there is more than just the storyline itself, and that IT both understands the business and can execute to business outcomes. This may mean shifting resources around internally in order to put the best people on the initiative to make that point.

Soon after, however, a case needs to be made to staff up the front office that is required to run IT as a business as well as develop and manage a formal strategic service portfolio, which will enable execution to those business outcomes. Expect some short-term success with your efforts to change the conversation, but recognize that creating a sustainable long-term collaboration requires that the business case sell an IT transformation to a service and value-optimizing delivery model. This means moving IT from a capable deliverer of business requests to one that collaborates, anticipates and shapes demand, executing as an external service provider would do. Depending on the starting point, it may take two to three years to move from Level 2 to Level 3 maturity.

One caveat: If business leaders only expect efficiency from IT, IT must satisfy these expectations before suggesting it deliver more. This generally means achieving required IT metrics such as project completion, uptime and risk mitigation. If IT is not delivering against its efficiency targets, it must first prove it can meet these expectations so that there is a natural trust built into the business and the IT organization which is required to deliver higher levels of value. If the business doesn't trust IT to deliver what it considers "table stakes to enter" IT metrics, it will never move its expectations beyond that to deliver on business outcomes.

CIO Actions:

  • Align, integrate and communicate the IT strategy to the business, including its contributions to business outcomes. Do not make it a siloed departmental strategy.

  • Assign your best talent on new collaboration as your storyline gains traction and interest, to assure initial success with growth-oriented initiatives. At the same time, develop the business case for investment to increase maturity and operate like a service provider.

  • Plan for a two- to three-year transformation to Level 3 maturity, which requires investment in the IT front office as well as development and life cycle management of a strategic IT service portfolio. Use the Gartner ITScore maturity model to assist in identifying your roadmap.

  • Measure business benefits of all IT capabilities delivered to the business through the value chain.

  • Invest first in delivering on service quality and IT-centric outcome expectations prior to any discussion of increased collaboration and service delivery.

Show You Can Deliver More Than Run the Business: Invest in Bimodal IT

Bimodal defines two work styles, one predictable (Mode 1) and one exploratory (Mode 2). Most IT organizations excel in the predictable work style and, in fact, efficiently running the business demands predictable capabilities and processes such as project management, change management and incident management. But in any period of innovation such as the digital business era being ushered in currently, relying on a predictable work style exclusively does not work. Why? Because investments in innovation require exploratory work in order to increase the chance for success. New products can take years to develop and launch in the market. The Mode 2 exploratory work style allows for testing of ideas and hypotheses, validating or invalidating them, and pivoting or moving forward where they make sense. The idea is to both increase the chance for success as well as reduce the time to market.

Many organizations are waking up to the need for bimodal due to a change in the competitive landscape or a realization that the digital era is upon them, offering new capabilities that were never possible in the past (such as IOT and real-time analytics) and which can be used to create or enhance products/services or customer experience. The Level 2 maturity IT organization is often overwhelmed by the cataclysmic changes in the technology landscape, and are struggling to both gain speed and relevancy in this new world that should be core to the value IT delivers.

In our 2017 Gartner CIO Survey, we asked more than 2,500 CIOs their self-reported ranking on IT and enterprise performance related to digital business. Approximately 7% assessed themselves as a top performer, 86% as a typical performer, and 7% as a trailing performer (see "The 2017 CIO Agenda: Seize the Digital Ecosystem Opportunity" ). When we asked the percentage of respondents using a bimodal approach, we found that top performers implemented bimodal at a 68% rate, which is four times as much as bottom performers and 1.6 times as much as typical performers (see Figure 2).

Figure 2. Respondents Using a Bimodal Approach

Base: Total answering, excludes not sure
From 2017 Gartner CIO Survey

Research image courtesy of Gartner, Inc.

Source: Gartner (December 2016)

Why this higher implementation rate? Because bimodal fosters increased innovation, closer engagement between business and IT, and faster time to market (see Figure 3).

Figure 3. Benefits of a Bimodal Approach (Multiple Responses Allowed)

Base: Have bimodal approach
From 2017 Gartner CIO Survey

Research image courtesy of Gartner, Inc.

Source: Gartner (January 2017)

A key business benefit of bimodal is that it promotes a coordinated approach to improve the integration between new systems of innovation and back-office systems of record that contain master data such as customer account information and billing records. Further, a bimodal approach ensures these new business-driven systems plug into a coherent enterprise information and technology architecture that bolsters security and ongoing supportability. Without a bimodal capability, LOBs often have little choice but to work directly with vendors to deploy new systems of innovation. This takes IT out of the loop, and can create the vulnerabilities and costs associated with managing a greater diversity of LOB investments without having a coherent architectural plan.

CIOs can start bimodal within their IT organizations to demonstrate that they can go beyond efficiently running the business, with the intent that demonstration of new capabilities will get the attention of business leaders who then want to work more closely with the IT organization to achieve their business goals. When starting bimodal (versus scaling it to the enterprise), the goal is to begin to change the culture of the IT organization to one that is more business-centric and achieve small successes by learning new ways of collaboration and new techniques (such as agile development, DevOps) which will ultimately begin to change the perception of IT by LOBs. Applying new techniques will begin to change the culture of the IT organization, and these techniques should be backed up by training and coaching in order to cement the capabilities, and resist going back to the "old" ways of doing things.

Initial Mode 2 initiatives should be "island projects" that enable learning, collaboration and implementation of new techniques/processes, but do not place burden on existing systems and processes to change (see "Kick-Start Bimodal IT by Launching Mode 2" ). Remember that the goal is to achieve some successes over a six- to 12-month period, show that the IT organization can achieve the benefits of bimodal that are shown in Figure 3, and that these can be used to develop a more comprehensive transformational plan and budget to a higher maturity and a service and value-optimizing capability. In the typical Level 2 maturity organization, IT is not perceived to be business- or customer-service centric, and often it is perceived to be the purveyor of the word "no." Changing that perception will need to be done one initiative at a time until such time there is enough forward momentum to justify an investment in front-office capabilities and the transition to higher levels of IT maturity and performance.

CIOs must justify the investment and transformation to higher levels of maturity that optimize service and value delivery in time to ramp up to the significantly greater demand that IT will incur when it is successful with its initial bimodal IT initiatives. Failure to do so will result in a severe lack of resources and funding, and ultimately, reduced trust in the IT organization.

As IT establishes a bimodal Mode 2, it should be on the lookout for potential new specialty vendors, ecosystem partners and platforms that can enable new business innovation. A key aspect of a growing Mode 2 bimodal maturity is becoming an effective broker-service asset to the business. This will require working with procurement to establish an adaptive sourcing capability that can quickly bring on board new partners to support prototyping and POC services with streamlined contracts. In this way, IT will become an attractive internal innovation partner to get things done with a more robust due-diligence approach to partnering instead of every LOB working on its own with "some IT firm they know."

One other technique we've seen helpful to start to change the perception of IT but which requires some small additional head count investments is to staff an innovation group, typically reporting to the architecture and solution strategy group (see "How to Establish a Service-Optimizing Organizational Structure" ). The focus of this new innovation group is to engage with and educate business leaders about new technology and to ideate collaboratively on new potential digital business opportunities that could arise as a result of new capabilities. Ideas and education can come from startup technology companies, visiting Silicon Valley and working more closely with business partners or businesses in your community that are further ahead in digital business than you are. The idea is to get business leaders educated and excited about new digital business capabilities as they also see IT in a leadership role, naturally changing its perception of IT along the way.

This type of innovation leadership role often works well in industries where business leaders lack technology expertise, and where there is either a corporate culture or a willingness to learn and consider new processes, products and business models. What often results is a new appreciation for IT from business leaders, and an increased trust that IT knows their business and can help them achieve better business outcomes, thus funding IT's transformation for improved service and value delivery.

CIO Actions:

  • Invest in project bimodal, which can begin to change the business perception of IT.

  • Fund an innovation group that collaborates with business leaders on new technologies, vendors and how they might be applied internally for business benefit.

  • Pursue training and cultural changes in the IT organization to move the business perception of IT toward a "value" orientation (for more information, see recommended reading).

  • Provide Mode 2 business value by being an effective broker service provider of third - party resources for digital business innovation efforts.

  • Be ready for increased demand when succeeding with bimodal, and assure that increased funding matches demand as well as implements other Level 3 maturity requirements. This includes aligning portfolio management processes and IT delivery capabilities to both modes.

Invest in the IT Front Office, Starting With Business Relationship Management

Higher levels of maturity encompasses running IT as a business or as an external service provider (ESP) would do. Think about how an external service provider works with your organization. They have relationship managers (also called account managers) who are responsible for working with your organization to identify potential demand and to present the capabilities and services offered. They often work in a consultative mode, listening to understand problems and opportunities, and offering advice (and proposals) to resolve them. If you already have a relationship, the relationship managers are also responsible for reviewing status and customer satisfaction, following up on any missed communication or SLAs.

The business relationship manager (BRM) inside the IT organization operates similarly to that of an ESP (see "Stakeholder and Business Relationship Management; CIO Desk Reference Chapter 12, Updated Q3 2012" ). They are responsible for liaising with the LOBs, understanding their needs, and sensing demand while also presenting the IT service portfolio to them for consumption. In addition, they report IT performance and measure customer satisfaction. They follow up on missed expectations and complaints.

The BRM role is IT's method for measuring and communicating IT value to the business. The IT BRM is also the role that supports the BU with IT portfolio management and innovation management. Over time, as IT matures, the business expectations of IT move to enhancement-oriented, with a focus on business outcomes. However, that comes over months — if not years — of confidence building. Even so, the CIO that wants to change perceptions could begin maturing the BRM function in the organization, or if it is nonexistent, start one up. In large organizations, BRMs are normally a full-time role; however, in smaller organizations it may be delivered as a part-time role. However, part-time BRM roles should not be the responsibility of service delivery personnel (for example, application management, project management) because that would relegate BRM to an operational focus, not the leadership focuses required. In addition, where it is not a full time role, to increase trust and eventually expectations, it must be formalized for increased communications and engagement. It should not be left to the few minutes left at the end of the week.

When starting the BRM, it is in the role of listener and learner — assigned to the business units that are most receptive to the idea, and have the largest potential opportunities. The idea is that the BRM increases engagement, resolves outstanding issues and creates an environment of trust. As they create effective relationships, resolve issues and report IT performance against expectations, they can begin to beyond listening and resolving to a more proactive enabler of IT to satisfy business demand. The service portfolio can be formalized and used as a means of offering services with specific value propositions that enhance business outcomes (see "ITSM Fundamentals: How to Create an IT Service Portfolio" ).

As the service portfolio is formalized, so too will be the product management role to evolve the services and portfolio to meet changing business requirements (see "Clarifying the IT Service Manager's Role" ). As BRM matures, it will become more proactive, more strategically aligned with LOBs and more capable of evolving the supply of services to the evolving demand on the basis of business outcomes.

Effective BRM may take one to two years to fully develop. As it develops, other front-office functions will need to mature as well, including the service management office, and enterprise architecture and governance (see "How to Establish a Service-Optimized Organizational Structure" and "Rethink EA as an Internal Management Consultancy to Rapidly Deliver Business Outcomes" ). Portfolio management must also be improved, as a means of investing in the right things to execute to business strategy (see "ITScore for Program and Portfolio Management" ). As such, investing in the front office, starting with BRM, should be considered a long-term approach to changing the business expectations of IT. Therefore, it should be done in combination with some of the shorter-term measures suggested above, such as changing the conversation, changing the culture and starting bimodal IT. Moreover, it is easy to fail with BRM by starting the conversation and getting the business's attention, but failing to back the relationship managers up with the right investment portfolio and a strategic service portfolio.

CIO Actions:

  • Establish a BRM function in the organization, starting relatively small in a listening and resolving mode. As relationships build, move toward a more proactive demand management role.

  • Recognize that BRM will fail and digress into a complaining channel if it does not coincide with investments in PPM and strategic service portfolio management.

  • Realize that while BRM does not have to be a full-time job, it must not be relegated as optional, either. Make sure those assigned give priority to the function to advance relationships and collaboration.

  • Combine starting/maturing BRM with other shorter-term methods cited earlier to move the needle on business expectations of IT toward enhancement and value oriented.

Case Study

Red Bull North America (RBNA), an energy drink company headquartered in Santa Monica, California, is the largest subsidiary of Red Bull, its Austrian parent. In early 2013, the executive leadership decided IT needed an "extreme makeover," says CFO Marc Rosenmayr, and brought in new leaders, including CIO Bryan Muehlberger, to get it back on track. In a scant two years, Muehlberger and his leadership team transformed the IT organization from an underperforming thorn in the side of enterprise leaders to a deeply respected and highly regarded business partner. Structured maturity assessments were the cornerstone of Muehlberger's approach to significant IT improvements that resulted in both hard and soft business benefits. This case study explores how and why Muehlberger leveraged Gartner's ITScore maturity assessment capabilities and the results that accrued from his team's efforts (see "Maturity Management Elevates Red Bull North America's IT From a Thorny Problem to a Trusted Partner" ).