An alarming pattern has surfaced in that many companies are concentrating on alignment and are finding that their performance is either declining or moving sideways. Companies are focusing on the wrong solutions with respect to their Information Technology problems, resulting in severe bottlenecks to growth. Companies need to learn how to break out of the trap and build IT organizations that allow for growth rather than obstruct it. Companies will need to be committed as doing so will require a continuous effort.
The essential goal for these companies in order to succeed is to move IT into the upper-right quadrant, where they will be highly effective and highly aligned, and where IT appears to be enabling growth rather than inhibiting it. In order to move in this direction, it is my recommendation that the companies begin by installing local area networks locally, as well as a central database stored on a server to connect to head office. This option is economically feasible, will improve local efficiencies and will allow the sharing of resources and records. I would also recommend that the companies begin feasibility testing to explore the implementation of an internal ERP system to support global operations in the near future. Doing this will help companies to keep up with the competition.
Companies are getting caught in an “alignment trap” whereas they are spending large amounts of resources towards being highly aligned and not realizing the importance of being highly effective as well.
There are four quadrants within which companies are being categorized with respect to their ability to be effective. They are being measured based on the ineffectiveness as far as completing projects on time and on budget, and the ineffectiveness of alignment to an important business objective.
The first of these quadrants is “alignment trap”. Despite being highly aligned, the companies within this group are less effective in completing budgets on time and within the budget. Charles Schwab & Co. is currently in this position and as a result, continues to spend money on projects and seeing no growth.
The second quadrant is “maintenance zone”. Companies in this quadrant are less aligned to major business objectives but are maintaining below average levels of growth even though they are less effective and spending more in IT as a result. In this zone, IT is not performing well, is not valued and is segregated from the company’s main functions. Management is budgeting enough to keep the system running, but IT is not providing any added value to the business. Third is the “well-oiled IT” quadrant which can be categorized as second best. In this group, companies are highly effective at bringing projects in on time and on budget. They are more focused on execution. Still, companies are less aligned meaning that their IT group does not fully understand the priorities of the business and where to spend the resources.
Lastly, the “IT-enabled growth” quadrant is where all companies would like to be. This quadrant encompasses those companies who are not only highly effective at making IT projects successful, but are also highly aligned in relation to their business objectives. Examples of companies who have succeeded in this respect are Nestle, Wal-Mart, FedEx and Dell.
The following are IT-related issues that organizations are currently facing as they attempt to align their business goals with IT technology:
– Believing that alignment is the solution to their IT problems, companies are spending enormous amounts of money without solving any problems. – Various divisions are driving independent initiatives, each one designed to address its own competitive needs, resulting in complexity of IT systems (no standardization). As a result, costs increase and the fragmented divisions make it harder for managers to coordinate across business units. – Complexity in systems is making enhancements to systems and improvements to infrastructures more and more difficult to implement and potential benefits are left unused. – Redundant applications that perform the same or similar functions. – Outsourcing the wrong activities.
– Data in multiple information systems are viewed as “garbage” and producing inconsistencies (i.e. salespeople are promoting products that are discontinued) – In companies similar to Charles Schwab & Co. for example: IT staff response have become slow and expensive; IT engineers are spending more time fixing bugs in the systems than ever before; and several big and ambitious projects are overdue and preventing the company from being competitive.
The following criteria will be used to evaluate each of the alternatives:
– IT spending must be aligned with the company’s growth strategies (need to reduce IT costs i.e. savings on software licensing costs where bleeding money, and head count). – Must be shared ownership and shared governance of IT projects. – Need to reduce complexity (or emphasize simplicity).
– Increase efficiency (doing things in a cost effective way with no duplication of time and effort). – Economically feasible. – IT infrastructure to support networked operations in multiple locations. – Need to centralize and simplify the IT functions.
– Need high effectiveness to achieve an objective through the use of: 1. simplicity (or reducing complexity) – by implementing companywide standards, replacing legacy systems, building new solutions on simplified and standardized infrastructure; 2. right sourcing – choosing the right source for a capability and maximizing effectiveness while minimizing cost; and 3. accountability – executives should get the information they need to measure the progress of IT and IT people should be held accountable for outcomes. – IT needs to be reliable, without excess complexity, and needs to deliver projects consistently with desired functionality, timing and cost. – IT systems need to run smoothly and reliably.
– IT functions such as architecture and infrastructure need to be balanced with respect to the needs of the entire organization and those of individual businesses. – Need a good governance structure so as to set parameters to keep an organization on track (i.e. no more than four new technology releases per year).