The Three Stages of IT/Business Alignment

Ann All spoke with John Hughes, president of IT management consultancy GrowthWave. His IT career has spanned 26 years, encompassing many roles, positions and industries. He has worked for and helped lead companies ranging in size from $2 million to $17 billion, including Bank One, Worthington Industries and Cendant.

All: You say there are three stages of IT/business alignment — tactical, strategic and innovative — and that they build upon each other. So is it not possible to attain innovative alignment without first achieving tactical and strategic alignment?
Hughes: It depends upon the objectives of the company. The alignment model has to do with the mature company where the IT organization has kind of lost its way in terms of meeting the needs of the business. That was the type of organization I was leading when I built the first IT/business alignment team, and we developed this model. It's how you go from misalignment to alignment. But a start-up, for example, might start at the innovative stage and say, "You know what? The tactical stuff is just going to happen."

Two things are critical: The business leaders have to make it clear what the objectives are of the organization, and the CIO or IT leaders have to align themselves with those objectives. If that's not clear, if the communication isn't happening, that's where you get frustration. I've seen CEOs throw up their hands and say, "I can't deal with IT. How can I get value out of IT?" But it really starts with the CEO and clear objectives. It sounds so cheesy, but it really takes leadership — business leadership within IT where CIOs have to become business leaders, but also IT leadership within the business. It doesn't mean they have to become technologists, but they have to own the results of IT. At so many companies, they are pumping dollars into this black box called IT almost as if you are supposed to do that — without ever expecting returns out of that.

All: You also say that many CIOs have trouble moving from misalignment to tactical alignment because it can create an image problem with users/the business. Can you explain how this happens, and what can be done to avoid it?
Hughes: Unfortunately, it's going to happen in certain pockets. What you have in those mature types of organizations is people within the business that really know how to play the game of IT. They will latch on to a developer, and use that developer as much as they can. That's where misalignment is occurring. Now you have a developer that is setting the agenda, and the priorities of tactical alignment aren't occurring. The problem you get into is, how do you detach those almost personal relationships? These are relationships where people in the business have figured out how to get things done from IT, but they are making it difficult for IT to achieve the business objectives. [Their personal objectives] may not be the highest-return items IT should be working on, the items where the business is going to get the greatest returns for their investments in IT. Then those people feel neglected.

What I did in this situation was communicate to the IT steering committee that IT is actually going to be doing less for you. You have to let them know why. In this case, the business understood that they weren't communicating with IT, so IT wasn't doing the right things. You have to explain to them that it'll seem like you are doing less for them over a period of time because you are going to be repositioning how you interact with the business. Tell them you want to minimize the amount of tactical things you do, by automating as much as you can. It's creating capacity; IT has to optimize the work that it does. What a lot of IT organizations do though, is they are really good at creating capacity but they pump it right back into the firefighting. They don't know how to shift it to more strategic objectives.

All: Can you explain the differences between tactical and strategic alignment? Do many companies have difficulty moving from tactical to strategic alignment?
Hughes: The leap between tactical and strategic alignment is the most difficult because of the relationship between the business and IT. The bottom line is the communication between IT and the business. IT needs to make sure they understand the true priorities of the business. I've only ever been in one company that got strategic planning right, from the top down.

Most of the companies I've been in would just get the executives together and say, "OK, we are going to do strategic planning" and then send everybody to go off and put together their strategic plans. It took me a few times of going through this cycle, and then I said, "How can IT go and do strategic planning if I really don't know where the rest of the company is headed?" It needs to be more of a trickle-down or waterfall effect. You start with the really true objectives the business has, then sales and marketing and operations fill in their blanks, and then you get to the back office. So that's where it falls down. What should IT be working on? That's what alignment is all about.

All: Is innovative alignment the goal of most/all companies? Should it be?
Hughes: It gets back to the "quality is free" concept. If you are executing strategic alignment correctly, with ongoing communication and collaboration between the business and IT, then innovative alignment will happen. On my team, we had full-time strategists whose job was to ensure that this ongoing communication occurred. They would ask the executives in finance and in marketing what are your biggest needs, your biggest struggles, your biggest opportunities? It was the best way to educate IT about the business and, at the same time, we could educate the business about IT, about the technologies we had in-house and technologies that were on the market. When you get this ongoing dialogue and collaboration, that's when you get the innovative opportunities.

I need to clarify the concept of innovation. Innovation in this case doesn't mean you are on the bleeding edge of technology. It's business advantage that occurs through this process that might not have otherwise occurred. I don't want to scare anyone away, because they think the concept I am bringing is, "You have to be innovative." That's not it at all. It just happens naturally.