As I stated in my first blog in this series, IT strategies should define the direction and future state of the IT organization, systems, and processes in terms that are actionable. However, jumping directly to those topics when presenting an IT strategy can be a mistake that often results in the CIO losing their audience.
CIOs should explicitly answer the question, “How does the IT strategy support the business strategy?” Best practices suggest establishing clear linkage to business strategies at the beginning of any strategy discussion, document, or presentation. CIOs should be able to tell a story, connecting each business strategy to one or two IT strategies. There are challenges that have to be overcome, but the benefits are well worth the effort.
Linking Projects and IT Goals to Business Strategies
CIOs that are respected as business partners regularly demonstrate an understanding of the business strategy and their role in achieving overall success. They are comfortable talking in these terms and helping drive better definition of strategic objectives and expected outcomes through these discussions. In most cases the linkage is obvious, but it should still be explicitly stated.
For example, carriers that want to enter new markets or increase profitability by improving loss ratios through product changes need to have these changes delivered quickly. Carriers often have a backlog of product changes. By linking acceleration of delivery to the growth objective, CIOs can gain acceptance and engagement for Agile concepts that might otherwise be perceived as purely an IT issue or the latest IT fad.
Analytics projects are most easily linked to an objective focused on improving profitability. Better pricing, better underwriting, as well as fraud detection all have a direct impact on loss costs and therefore overall profitability. Digital process enhancements should improve customer experience, increasing retention, as well as lower process-related costs. CIOs should clearly state the investment costs needed to implement these capability improvements after the expected benefits have been established.
Overcoming Linkage Challenges
It may be harder to demonstrate direct linkage of foundational capability projects to strategic objectives due to a lack of immediate business benefit. Describing them as required capital investments may help. It is important that the benefits of these investments on future projects, such as lower development costs or accelerated delivery times, are explicitly stated. Another approach is to bundle foundational elements into initial projects to deliver expected business benefit. While this may increase the cost of these initial capabilities, it can help in obtaining funding for foundational components.
Quite often, IT strategies can support multiple business objectives. This can easily be portrayed in a summary matrix. While it may be tempting to indicate that IT strategies support all or most business strategies, it is better to highlight the most important linkages. This is less likely to require explanations that put the CIO in a defensive posture and weaken their credibility.
CIOs often lament that their organizations do not think strategically. This makes it difficult to create a strategic plan. However, every carrier has growth and profitability goals. By creating a simple framework for alignment in the absence of a well-defined strategy, CIOs can help bridge the gap and help drive more strategic thinking. Strategies are iterative and will be improved each year.
Connect IT Principles to the Strategy
IT should also make sure that any recommendations for IT principles are linked back to business strategies. This is more challenging. However, restating business strategies emphasizes IT commitment to making the organization effective and helps educate the audience on the importance and impact of those principles.
Principles should not be presented in a vacuum. Some may not have direct linkage to a specific business objective and therefore may require IT to state stand-alone goals. For example, the business strategy may not explicitly target reducing business risk, even though this may be implicitly supported. Evergreen technology principles should be linked to risk reduction, as discussed in my third blog asking how IT strategy reduces business risk.
IT strategies are a first step in the budget justification and negotiation process. Effective CIOs begin positioning for budget negotiations during the initial strategy discussions. Clearly establishing alignment of goals is the most effective way to do this. By establishing alignment, value, and capability delivery expectations as well as by acknowledging associated risks, CIOs will significantly enhance the likelihood of strategy approval and adoption.
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