Harnessing IT value

The role IT plays in operations has fundamentally changed

The IT function is typically portrayed as an island, separated from the rest of the organisation. If you don’t believe me, just look at any organisation chart.

The assumption is that IT can be managed effectively from a box on the organisation’s map. Technology is assigned a head ­ typically the chief information officer (CIO) ­ who is given a budget and a remit to deliver value to the business.

If only it were so straightforward.

Such practices date back to the early days of computing, when the objective of the IT function was essentially to keep the computers running.

Today, the role that IT plays in the operations and strategy of most companies has fundamentally changed. Many business models are now defined by IT.

Approaching management

Consequently, the challenge is not to manage IT but to generate value through IT. While subtle, the latter quest is a fundamentally different proposition that requires a different response.

Managing IT has never really been about technology. The process has always relied on a knowledge-based undertaking.

Running complex computer systems used to require a great deal of specialised knowledge, most of it of a technical nature. The business often felt knowledge was best housed within a separate organisational unit under the control of the head of IT.

But we all know that generating value demands much more than merely “keeping the lights on”. If that were not the case, outsourcing would not pose much of a challenge and would be an obvious choice. In the information age, delivering value to the business through IT similarly requires knowledge. However, the necessary knowledge is dispersed across the organisation.

Such a challenge presents a particular conundrum for CIOs: while charged with generating value through IT, they do not have access to or authority over all the necessary knowledge.

So, how can all CIOs harness the required knowledge to deliver business value through IT? And how can the knowledge be integrated and co-ordinated?

In the course of our research at the Information Systems Research Centre at Cranfield School of Management, we have identified six competencies that all organisations must possess if they are to have any chance of their IT investments delivering value.

The six competencies are based on a model that describes a comprehensive map of what the organisation must exhibit. It is critical to recognise that the knowledge underpinning each of the competencies (see box) will be a combination of business-based and technically-focused knowledge.

In the case of the “delivering IT supply” competence, for example, most of the knowledge and skills are likely to be technically-grounded. At the other extreme, business awareness is likely to be more crucial in “exploiting information”.

The Cranfield research highlights, and this is the crucial point, that the resource elements, or the knowledge and skills, underpinning each of the six competencies are not located solely in contemporary IT functions.

Consequently, the competencies do not reside in any one functional area ­ and the wider the span of knowledge being integrated, the more complex the challenge of exhibiting competence.

Facilitating education

Recent work exploring social capital in organisations provides a glimpse as to the terrain that must be covered. Social capital can be seen as networks of strong, personal relationships developed over time that provide the basis for trust, co-operation and collective action.

How we structure organisations can impede the development of social capital; it may encourage fragmentation rather than integration.

Often, little trust exists between IT specialists and employees in the business. Indeed, it has been suggested that there can be a cultural difference between employees from the IT function and from the rest of the business.

Many CIOs recognise they need more engagement from executives across the organisation to deliver value from their IT investment. The reason, which is not often explicitly stated, is to have access to both the line-of-business leaders and the knowledge of their reports.

CIOs do attempt to facilitate the harnessing of knowledge, although not always recognised as an objective of the initiatives they promote.

For example, many CIOs have appointed relationship managers as a link between the IT function and business employees.

Educational programmes are also established to improve IT workers’ knowledge of the business. Building such programmes can help to overcome the fact that it can sometimes be difficult to receive business engagement and access to executive knowledge.

However, educational initiatives do not overcome the requirement for business and IT people to work together, integrating and co-ordinating their knowledge. To this end, programmes for non-IT staff should also be instigated to create awareness of technology issues.

IT is not an island, but a part of the mainland. And until that fact is acknowledged and recognised on the organisational map, firms will continue to struggle to generate value through IT.

Professor Joe Peppard is the programme director for the Cranfield IT Leadership Programme:
www.cranfield.ac.uk/som/executive/itlp

Six competencies for delivering IT value

Creating strategy
The ability to identify and evaluate the implications of IT-based opportunities as an integral part of business strategy formulation.

Defining the information system contribution
The ability to translate business strategy into processes, information and systems investments – and to formulate change plans that match business prior ities.

Exploiting information
The ability to maximise the benefits realised from the implementation of IT investments through the effective use of information, applications and IT services.

Defining the IT capability
The ability to translate business strategy into long-term information architectures, technology infrastructure and resourcing plans that enable the implementation of the strategy.

Implementing solutions
The ability to deploy resources to develop, implement and operate IT business solutions, which exploit the capabilities of technology.

Delivering IT supply
The ability to create and maintain an appropriate and adaptable information, technology and application supply-chain and resource capacity.