Effectiveness Trumps Alignment, Finds Bain & Company

Ann All

CIOs worry a lot about aligning IT and business goals -- maybe too much, according to recent research from Bain & Company.


A lack of IT/business alignment topped the list of worries for CIOs responding to a Society for Information Management survey in late 2006. Alignment has been so elusive for companies that Forrester Research recently suggested that they might want totry instead for business technology synchronization.


And now Bain & Company cautions CIOs that putting alignment before efficiency is the tech management equivalent of rolling out the cart before the horse. The head of Bain's global IT practice tells CIO Insight that companies seeking alignment often allot IT resources to different business units -- which typically drives up complexity, costs and inefficiencies.


A whopping 74 percent of respondents to a Bain survey considered their IT operations both ineffective and not in alignment with the business. Their IT spending rose 1.3 percent while three-year compound annual growth rate dropped by 3 percent.


CAGR jumped 37 percent for the 7 percent of firms who reported achieving both effective operations and IT/business alignment, while IT spending fell 10 percent. The 8 percent of companies that considered themselves effective yet not in alignment still managed to cut IT spending by 17 percent and increase growth by 10 percent.


The worst performers were the 11 percent of companies that considered their IT operations in alignment with the business yet not effective. Spending grew 8.4 percent, while growth declined by nearly 10 percent.


Put effectiveness before alignment, Bain advises tech execs.

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Sep 17, 2007 12:22 PM Paul Wallis Paul Wallis  says:
Hi Ann,Todays organisations are so complex and traditional modelling technology has been so limited that until now it has been almost impossible to fully document, analyse, understand, and communicate the relationships between business activities and IT resources. The reason that alignment has remained frustratingly out of reach is that, traditionally, business and IT have not had a way of talking the same language. Which means they havent been able to understand each other. And that means that alignment isnt going to happen unless something changes.Ive written about how, by seeing the big picture of the business/IT relationship, the process of alignment can begin. See http://www.keystonesandrivets.com/kar/2007/09/alignment-we-ne.html#more Reply
Sep 19, 2007 4:16 AM Jack Brown Jack Brown  says:
Ann,Yes, I agree that both efficiency and alignment of business and technology are critical factors for success. Despite all the gains in productivity that technology has enabled, there is still tremendous room for improvement in these areas.The most effective way I have seen to increase efficiency while aligning critical business objectives, processes and systems is to use the Helix methodology. You can learn more about it at the author's website at http://www.tnigroup.com. Or you can contact me at jack@myisys.com. Reply
Sep 19, 2007 4:58 AM Alan S Michaels Alan S Michaels  says:
As a former corporate planner and one who has spent the last five years building a global taxonomy that can be used to crisply define any company in terms of its specific lines of business (the industries it competes in), I strongly believe that alignment should always come first. Alignment does not, however, necessarily mean that IT resources should or should not be decentralized. If the Bain & Company study defined alignment as, the IT department fully understanding business priorities and having adequate staff to respond to those needs then the study is useless because it incorrectly made staffing issues part of the definition of alignment. Reply
Sep 19, 2007 6:34 AM Alan S Michaels Alan S Michaels  says:
Alignment to Efficiency A Ten Step Guide1) Understand precisely what businesses (industries) you company competes in2) Understand the business strategies and business objectives of each business unit3) Identify IT activities and solutions required by each strategic business unit4) Identify IT activities and solutions required by each cost center 5) Identify potential IT activities and solutions that can be shared by multiple areas6) Highlight where inconsistent business unit strategies and objectives limit shared opportunities7) If appropriate, as part of group strategy, modify the strategies and objectives of one or more business units to maximize sharing opportunities8) If corporate strategy and corporate budgeting processes enable enterprise resource allocation, then allocate resources based on corporate-driven priorities and group strategies that analyze and make the necessary trade-offs which should be made in concert with strategy strategies.9) As part of an ongoing process, it is also relevant to analyze resource allocations vis-�-vis competitors. (Although there are many cases of businesses doing more with less.)10) With the basic alignment that results from above, all of which is simple to do if the executive team truly wants alignment, the rest is efficiency a much harder goal because it requires analyzing and improving every corporate process in isolation and as groupings of linked processes (which should also be viewed in terms of linkages to channels, customers, vendors, and all other stakeholders)I believe Bain & Company is a fabulous company; and I believe their study probably has a lot of good information. My previous comment should have been:I believe a company can have business IT alignment even if there is a perception that there are not enough IT resources. IT allocations, whatever the amount, should be made in concert with corporate and business unit strategies. A study on alignment versus efficiency should try not to let resources levels bias the results.Thanks Ann for this article and your other articles - they are great topics. Reply
Sep 19, 2007 8:40 AM Tom Lodahl Tom Lodahl  says:
This Bain "finding" is almost completely trivial. What it says is that alignment does not matter much if IT cannot deliver on the "right things" identified in the alignment effort. Duh. Either way, the business does not get what it needs to succeed, and spends more m0ney in the failed effort. For total IT effectiveness, the Alignment effort must not only identify the right things to help the business meet its goals, the IT function must find a way to deliver those right things. This is not brain surgery, Rudy. Reply
Sep 20, 2007 4:24 AM Sonny Ako-Nai Sonny Ako-Nai  says:
Efficiency and alignment must not be seen as separate but rather work hand-in-hand. However where does one start?Organizations or business can never have enough or adequate Technology Solution in this ever changing environment both technologically and business wise.The approach is first to assess the effective utilization of the current IT and institute plan to address the gaps.In addressing the gaps, consideration MUST then be given to Alignment. But again, alignment must be in line for the current and future strategy of the business or organization.I have been fully involved in this process and have experience much success using this approach. Various methodologies can then be used in achieving either.Thanks.Sonny Reply
Sep 20, 2007 5:25 AM Freddy Ndhlovu Freddy Ndhlovu  says:
Ann,Thanks for the good article but I just wanted to point out that IT inefficiencies themselves are a misalignment of IT operations with business. The alignment of IT to business should be a continuous process (not a start-stop event) and CIOs should not 'sleep' on duty merely because their IT systems and operations are in alignment with business strategies and processes. They should work to eliminate any IT inefficiencies if they are to bear results of any alignment initiatives.... Reply
Sep 20, 2007 10:30 AM The Management Consultant The Management Consultant  says:
Perhaps to approach this from a business point of view would give a welcomed dimension. Bains debate is in my interpretation drawn too tightly. Consider what you are trying to achieve? .... Is the endgame a state of complete technology synchronization with the stakeholder groups to ride down the experience curve and gain efficiencies? If this is the Bain issue think more deeply. Many industry sectors are now in what is commonly called' freefall change' driven by both internal and market forces. In such a cinareio of complete technology synchronization and alignment is at best only achieved fleetingly. I am beginning to advise clients to re define technology as a business partner to transition and accept that alignment is a inherently unstable methology. The theory of inherently unstable IT architecture should be seen as a competitive advantage if quality and efficiency are maintained at or in front of industry average benchmarks. Reply
Sep 20, 2007 11:19 AM Dr. Frank L. Harper, Jr., PhD, PMP Dr. Frank L. Harper, Jr., PhD, PMP  says:
I agree with the Bain Groups advice that IT execs should focus on effectiveness. However, what the Bain's study seems to have overlooked is the business must be in alignment to allow IT execs to be effective with aligning IT to help execute the business strategy. Business alignment occurs when the business scope is internally aligned between its elements of: vision, mission, values, customers/markets, products/services, strategic intent, driving force, market space, and sustainable competitive advantage. IT alignment occurs when the IT strategy is partnered with the business strategy thus its execution is focused on bringing to fruition the business strategic intent. The issue with business alignment which may hinder ITs effectiveness starts with mobilizing all business units toward accomplishing strategic objectives defined during its business scope. To be successful a business must realize a tri-state of alignment:1) The business scope internally aligned between the aforementioned elements. 2) All internal business units aligned with each other.3) The aligned internal business functions, as a whole through the aligned business scope, aligned with the needs of the external marketplace.Just as the human body needs to have all its internal organs working in harmony to allow the body to be physically and emotionally fit. A business must be aligned to be in a state of strategic fit. That is a certain degree of collaboration must exist for organizations to meet the foundation requirement of its strategy.Strategic fits should be understood as a continuumgoing from misalignment to alignment as Entropy (chaos), Misfit, Mixed, Threshold (minimal), Harmony, and Perfect alignment.Without alignment, a business proceeds in state of chaos with each unit optimizing its own provincial view of the world at the expense of the whole business.IT executives cannot be effective at IT alignment when the business alignment is not in harmony. This presents a case for ITs rise from a supporting player to a strategic partner. IT execs can increase their ability to be effective by partnering with the business to help move it from the lower end (Entropy, Misfit, Mixed, Threshold) to the upper end (Harmony, Perfect) of the strategic fit continuum. Reply
Sep 22, 2007 11:01 AM Michael Wood Michael Wood  says:
There can be no efficiency of value if it does not contribute to the goals of the organization. Beware of the Efficiency TRAP. Reply
Sep 26, 2007 7:03 AM Gail La Grouw Gail La Grouw  says:
I don't believe that one should be developed at the expense of the other - no do I believe it needs to be. I have been a corporate performance consultant for 15 years and I constantly challenge business units to take ownerships of the technology that both supports their business processes and the business intelligence. IT has for too long taken the back seat as the necessary evil, tolerated to ensure full uptime of corporate networks, desktops and transactional applications.As business competiveness moves into a realm largely based on business intelligence - it is time for C level executives to stop hiding behind the fear of exposing their lack of understanding of technology and embrace it in its full glory.70% of todays enterprise strategy requires technology implementation, yet only 30% of organisations include the CIO in the setting of this strategy - you don't need to be that smart to recognise something is terribly wrong with this picture.Most senior managers I deal with on a day to day business have very little understanding of what it takes to implement new technology - do they really think its just a matter of unpacking a box and plugging it in...I really feel somethings that they do!!!I consult in corporate strategy and marketing strategy - particularly in high tech companies, so technology is a major factor in any advance in capability and operational efficiency.In all new intiatives or re-engineering we integrate all three elements: People-Process-Technology.By business units taking ownership of the technology that enables both their operational capability and their business intelligence, alignment and integration with the IT function becomes a natural element. There is no reason for IT to decentralise personnel - so efficiency can be maintained. It is not difficult to achive both these goals simultaneously. Sometimes you just have to make IT sexy enough for managers to want to participate - dashboards are a great step in this direction. Read more on dashboards at http://www.coded-vision.com/dashboards/index.phpAll I can say is - CEO's wake up and quit hiding behind your egos. Technology is probably THE most critical competitive element moving forward. So get that CIO around the board table. Snooze and you lose... Reply
Sep 26, 2007 7:18 AM Gail La Grouw Gail La Grouw  says:
I really don't agree that one needs to be at the expense of the other.I have been a corporate performance consultant for 15 years and spent many hours developing and impelmenting strategy. This has included process re-engineering and implementing business intelligence tools.In all of these programs of work we include the three elements People-Process-Technology.A key change management tactic I use is to get senior managers to accept ownership of the technology that empowers their operations but also provides their business intelligence. In most cases managers have very little understanding of what it takes to implement new technology and care little to find out - that it a major barrier to alignment to IT.For too long, IT has been seen as the necessary evil, to be tolerated only to maintain the corporate network, desktops and transactional applications.With business intelligence a major factor in future competiveness in most industries, that has to change. You will not get alignment if the IT department is continually viewed as an outside party. And that needs to start at the top.70% of corporate strategy involves technology implementation, yet only 30% of strategy development includes the CIO. That needs to change!!CIO's generally get a raw deal - they are under resources, and their function largely under appreciated. Do managers really think new technology implementation is just unpacking the box and plugging it in. I have to wonder how much egos come in to play here - they don't understand IT , therefore they will not engage in discussions around it in fear that their ignorance show. Get over it - we each have our area of expertise.If managers take ownership of their units technology, things start changing rapidly - and alignment and efficiencies improve hand in hand. IT resource is generally too thin as it is, so if the business starts contributing to the function, then efficiencies start improving on both sides.Sometimes you need to start with something sexy - dashboards are a great entry into business intelligence technology, and it doesn't take long for managers to recognise their value. More on dashboards at http://www.theiqx.com/dashboards/index.php All I can say to CEO's who refuse to wake up to the power technology will play in the future - snooze, you lose. So get that CIO around the board table every chance you get. Reply
Dec 8, 2007 8:07 AM Bernie Hill Bernie Hill  says:
The suggestion by Forrester Research to target IT-Business synchronization instead of alignment is right on target. Alignment is a problematic and limiting concept because it obscures the real potential contribution of information and communication technologies to business success. Fortunately, the hype around alignment has been superseded by a more business centric focus on IT/Business coalescence.When IT seeks mere alignment with the business, it must continually strives to catch up with what the business wants to do - and thereby is relegated to a support role in the organization. However, when IT strives for true coalescence with the business, both IT and the business act and perform as one -- one set of goals, one playbook, and one continuous series of business achievements.The word alignment denotes parallel forces that run side by side but never coalesce. The idea of alignment was seized upon by CIOs because it allowed them to retain full autonomy while paralleling the direction business was heading. Just as aligned railroad tracks create an optical illusion, the word alignment conjures a mental illusion of organizational unity. This myopic concept of alignment is problematic in that it never aspires to unity - just two separate rails moving in the same direction. Organizations which seek unity-of-purpose between IT and business must instead strive for coalescence - not alignment - in order to improve their business outcomes. As an note, ITIL� 2007 exemplifies an enlightened perspective on the concept of alignment. It recently announced that, as one of its major changes in the new product version, it was abandoning the previously espoused concept of business and IT alignment, and has since matured to higher aspirations of business and IT integration. Bernie Hillwww.linkedin.com/in/berniehill Reply

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