in Business Strategy, IT+Strategy

#CIO Guide to effective IT Governance – Part 2

Strategic Governance

In part 1, we reviewed different types of decisions a #CIO is expected to govern that fall into four (4) broad categories. In this post as part #CIO guide to effective IT Governance series, we will review one of the four categories in detail – decisions that are #strategic in nature. Below is the summary (from part 1) of the types of decisions included in this category.

  • Strategic Decisions – These are the decisions that are tightly linked to overall corporate or business strategy. CIO is expected to participate and provide input on how and where IT can provide sustained competitive advantage. Depending on how involved CIO is with the corporate strategy or in other words having a seat at the table, CIO would be part of the governing body that makes those strategic choices. CIO in this regard is expected to ensure IT perspective or implications are considered.

Note: In the context of this guide, we classify strategic decisions are the one’s which involve in setting direction of the overall company and/or which impacts overall corporate or business strategy. In general many strategic decisions occur at different levels of the organization, however this guide focuses on decisions at enterprise level.

Companies are under constant threat from forces that are market driven and internal in nature. They have to continuously assess these threats and also opportunities to better compete or to survive in the marketplace. Executives have to make decisions to address the threats or the opportunities. Also, they need to constantly monitor progress of their decisions and adjust based on newly available information. Much of these threats or opportunities come as set of questions that require decision making in how the questions are addressed. More broadly, there are two categories in which the questions that require executive intervention fall into

  1. External (forces, threats, opportunities)

a. How to address competition or responding to a specific action from a competitor?
b. What to plan in the context of current Economic climate?
c. How to address changes in legislation or law?
d. Should we divest part of the Business?
e. Should we acquire a competitor or adjacent player or new Business for market entry?
f. Should we raise more capital?

2. Internal (forces, threats, opportunities)

a. Do we have the right capabilities in a function (say Marketing) to address growth plan?
b. How are our cost structures compared with industry/competition?
c. How are we progression on the Corporate objectives?
d. How much should we invest in a particular BU or initiative?
e. What positions to open and who to hire?
f. Approval of budgets and capital spend?

g. Downsize or restructure a BU or function/department

To address any of the example questions above, resources need to be expended either in terms of $$ or time. To ensure decisions are made rationally and with transparency, Companies tend to establish Governing bodies to make, manage and monitor decisions. Typically, to address these type of decisions at least two Governing bodies are established.

  1. Board of Directors
  2. Executive Leadership Team (and additional optional sub-committees as needed)

Further details are provided below for these two governing bodies.

Strategic governing bodies

From the details above, one thing that strikes odd is that there is no mention of #CIO in any of the governing bodies and that is not an oversight. This is the fundamental challenge that CIO’s face in making themselves relevant in participating and contributing to the strategic decisions. Many CIO’s disagree with this realty, however there are two aspects that is contributing to realty: 1 – perception issues and 2 – capability/skills gap. More specifically,

  1. Perception issues
    1. CIO’s are not considered Strategic. This is classic catch-22 situation where a CIO is never given an opportunity to demonstrate their strategic thinking (one’s that have the skills) which in turn reinforces that perception when no evidence is available to alter that perception.
    2. CIO’s are focused more internally. This is legacy perception that CIO’s are well trained to “keep the lights on” and more back office centric there by relegating them to operational stature. Some paint the picture of CIO organization as order takers.
    3. CIO’s don’t understand business. There is some truth to this one as many haven’t been able to strike a good partnership to drive Business agenda and the CIO organization haven’t learnt fully the concept of planning, managing, reporting and running their IT as another Business (Note: I will post about why running IT as a business is NOT the same as just implementing IT service management/IT service catalog. Just because you can price your services doesn’t mean it qualifies a functioning business although it is one of the key step)
  2. Capability/skill gap
    1. Strategic planning skills are absent in the CIO organization. Many CIO’s assume that when they implement Enterprise Architecture (#EA) organization that they have Strategic skills (Note: This is one of my future topic about distinction between #IT Strategy and #Enterprise Architecture). However, few realize that EA is still inward and technology focused, however there has been work in aligning the EA with business goals. This alignment is much needed, however does not meet what is needed to demonstrate Strategic planning capability, which require a combining of analyzing markets, competition, business strategy, finance, marketing, technology trends etc.
    2. Business / Cross-functional Communication skills are not sufficient. IT organizations might disagree with this statement as they believe they are good at communicating their IT performance across the enterprise functions. This is not about whether an Organization is communicating its performance or not, it is about communicating right set of information in the right language for right set of stakeholders. Many believe that communicating SLA’s or ELA’s or some kind of operating metrics is sufficient. This is far from the truth. This is similar to the perception issue mentioned about internally focused.

For progressive and forward looking CIO’s addressing these gaps is critical if they want to elevate their presence to the strategic level.

In next part of the guide, Part 3, I will cover the next quadrant of the governance related to #IT Investments. In the mean time, if you have any comments or thoughts please share below or connect with me directly using the social links.

Thanks

Raja Signature

 

 


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