Information technology (IT) strategy is a term many people use but few understand. In this blog, we share the key components of an IT strategy and why IT organizations need a strong, effective and understandable one.
Many people want to be strategic in their operations. However, most people in IT misunderstand what strategy actually means.
In IT, we like to talk about our cloud or data strategy but fail to comprehend why these “strategies” do not deliver the desired results. It’s because there’s a disconnect between the goals of the business side and IT’s plans. Lack of clarity creates trust issues between IT and the other business leaders, and this distrust inhibits IT teams from executing their strategy.
The best definition of business strategy includes two focal points:
- How do you improve the top line (gaining market share, increasing revenue)?
- How do you improve the bottom line (reducing expenses)?
These focal points lead companies to product strategies, marketing and customer acquisition strategies, pricing strategies, sourcing and more. Another approach references Sun Tzu, author of “The Art of War” — what actions can a company take to battle the competition? It is easy for people to understand why a company introduces a new product, but it’s not as easy for someone to understand why the latest AWS cloud service is strategic.
Let’s look at how using strategy in IT benefits every element of your business.
Developing a Strong IT Strategy
A good strategy fits on a single piece of paper, is visual and everyone in your company can understand it. The first two qualifications are pretty straightforward, but how do you ensure non-IT people understand your IT strategy?
Start with the “why.” Too often, IT organizations lead with the “what,” meaning technology, and lose business partners and even IT teams.
To create clarity between IT and the business, your IT strategy should align with the actions and direction of the business and business strategy. Some companies find this challenging as they may not have a well-articulated business strategy. CIOs should act as a bridge between the two parts of the company to decipher the business direction to create and align the IT strategy.
A key element in your IT strategy is explaining the why in non-technical terms. People, including our IT teams, need to understand the benefits of why before learning the how and what. It takes time to craft good why statements that resonate with business and IT people. The why statement provides the alignment to the business strategy.
For example, a why statement for a company growing by acquisition may be “Enable quick and repeatable merger and acquisitions to support growth,” or for a company with declining online sales, “Provide frictionless experiences for users to improve customer conversion.”
After you establish the why, articulating the future state – the what and how of your strategy – guides the organization on what to expect from IT over the next three to five years. In order to effectively communicate the future state, you need to effectively explain where you are today, including the blockers and potential impediments that hinder execution and what has to change to enable the future state.
Three Elements of a Successful IT Strategy
As we mentioned above, an IT strategy paves the road for your future state. It informs an organization about IT’s direction and goals and the plan to get there. Even though there are many benefits from a good IT strategy, these three elements are the most important to remember when creating your plan. Your IT strategy should provide the following:
- Decision-making guidance – An IT strategy helps your entire IT organization map out what actions to take and where to focus efforts. Without this guidance, IT leaders can make myopic or longer-term decisions that do not align with the company’s goals.
- Workforce planning and development – By having a good strategy, you can explain the key skills and roles necessary to execute your plans. Your IT teams can begin developing new these skillsets in preparation. It is also important when recruiting new people to the organization because you can explain how their role will change over time.
- Investment transparency – When you consider on average most enterprises spend between three to four percent of revenue on IT, leadership wants to know how this level of investment benefits the company. Without a good IT strategy, it is hard to explain investments, especially when it takes multiple years to see the full value.
Strategy Versus Approach
An IT strategy either supports or enables the business strategy. When IT leaders forget this, our strategy starts to fall apart. Without being able to tie IT activities back to market share, revenue or expense, we are no longer talking about strategy but tactics or approaches.
A good example is when CIOs asked for a mobile strategy a few years ago. The question they thought they wanted to answer was, “How should we approach mobile? With an app or a mobile site?” Every IT team answered with no preference, or they picked an app because it was the cool thing to do. However, the question they needed to answer was, “Why mobile?” An app or website can’t answer the why.
Now, let’s turn this around to make mobile a strategy. Customers struggle with making product decisions in-store, so they pick competitors’ products as often as they pick ours. If we create mobile tools to help customers make better decisions while shopping for our products, they will select our products more often, i.e., Mobile equals top-line growth.
How to Get Started
As a CIO, you know the challenges facing your business and IT organization. Creating an IT strategy seems straightforward and something you can put together quickly. However, to quote Steve Jobs, “You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
Here are a few steps to get started creating your strategy.
A key element to the IT strategy is knowing where the business wants to head, but we need to identify what business capabilities impact its performance. Sometimes we must focus on the foundational business processes before moving forward. Therefore, there are two elements to understanding business needs:
- Top-down business objectives
- Business capability maturity.
How well does IT meet the current and future needs of the business? What challenges exist? This assessment should include applications, platforms, data and security. It needs to consider how well IT teams can support the business and what impacts this support.
Now that we know where the business is going and have accessed the internal IT landscape, we need to determine what the future state looks like. This step is our opportunity to look at the world through rose-colored glasses and say, “What if?”.
One key activity within this phase is investigating new technologies and trends. We need to understand how the technology will help prepare us for the future. It is also important to spend time talking with your technology partners (and their competitors) to learn about their direction. This will give you insights into how their plans may impact your organization.
Here is where we spend the time to formulate our “why.” This step is when we understand our opportunities as these impact the business.
It is good to know where we want to go, but before we can determine how we will get there, we need to identify what gaps we have inhibiting us. These gaps can include technologies, required investment, adoption, organizational structure, skillsets and processes. Some gaps are easy and quick to address, while others can take multiple years. You will need to determine what actions you need to take to address the gaps.
With the actions we need to take identified, we can lay these out into a plan. Two things to consider are how you will know you have closed the gap and what midterm milestones or metrics you will use to know you are making progress.
It is also important to make sure you use the right milestones and metrics. We have seen many cloud projects fail because the strategy to reduce operating expenses used a metric that tracked systems deployed, which actually increased operating expenses.
In any business, a good strategy enables better decision making. Teams gain an understanding of how their world will change, what skills they will need to develop, and what opportunities may exist in the future.
By leading with why and aligning your IT strategy with the business strategy, every person in the organization should understand how it benefits them. This clarity creates trust because people will understand the investments and actions IT is taking.