In the previous post, we considered the first two of the four domains of desired change in IT organizations that was introduced in my 2001 article in Harvard Business School’s Balanced Scorecard Report. Satisfactory performance in the domains of Cost and Quality is merely hygienic and expected of every competent IT organization. Cost and Quality are the primary domains for desired change in traditional IT organizations. But in those enterprises where IT is essential to the value proposition (e.g. firms born during the “dot-com” era), IT leaders focus more on the agility of the IT organization and infrastructure, and their ability to innovate with technology on behalf of the parent firm. Here, we examine these domains a bit more closely.
Agility
Of the four domains, this one was the most difficult to name. I named it ‘Agility,’ not because of its precision as a word in describing the domain concept, but because it does a pretty good job of describing a bundle of fuzzy expectations for the performance of the IT organization.
While Agility certainly has to do with timeliness, timeliness means more than responsiveness. Simply satisfying requests more quickly than in the past is insufficient for the expectation of agility. Agility also pertains to the ability of the IT organization to change direction quickly, to reprioritize its work, to react to and even anticipate changes in the enterprise, industry, and or technology domains in such a way that opportunity can be seized and defenses mounted against threats. It is here under this concept of agility that business unit managers (BUMs) express their frustration that “IT just doesn’t understand our business.” After all, each BUM operates in a fast moving competitive environment, so from his or her standpoint, shouldn’t the IT organization be able to react and anticipate as quickly as the environment is changing?
IT leaders genuinely want to be more agile. But the nature of the external cost controls and internal disciplines that must be imposed by a centralized IT organization naturally tend to impair the IT organization’s agility. So while IT leaders understand the need to apply and adhere to policies for system design and development, information management and security, and reliability of processing infrastructure, the bureaucracy that these controls entail inevitably makes IT seen as plodding and unresponsive.
Innovation
Closely related to the domain of agility is Innovation. BUMs and IT leaders often disagree on where innovation in the enterprise should take place. BUMs contend that only they know their business well enough to imagine ways in which technology can be applied to create new value. Software vendors align with this belief, and market their wares directly to the BUMs, circumventing IT leadership.
Meanwhile, the IT leaders believe that the IT organization exists to concentrate specialized knowledge about technology in the enterprise, and contend the their specialists are best equipped and best informed to anticipate and propose new applications of technology.
Of course, both are right and wrong at the same time. Each group brings unique knowledge to the challenge of innovation, but it is only through a trusted partnership between IT and business units that innovation can effectively take place. Given the challenges and mismatched expectations of cost, quality, and agility, it is unsurprising that this partnership in innovation occurs so rarely.
Agility and Innovation are the Domains of Contribution
Satisfactory performance in the domains of agility and innovation are necessary for the IT organization to be seen as a true contributor to the task of realizing enterprise strategy. But an excessive focus on these two domains is risky if the enterprise satisfaction with the hygienic domains of cost and quality has yet to be achieved; the IT organization simply has no credibility to innovate if costs are seen as high and quality is lacking.
To be effective, IT organizations must manage a balanced focus on each of the four domains of Cost, Quality, Agility, and Innovation.
Next: The stage-maturity model of strategic alignment in the IT organization.