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What Makes Your Business Tick?

CIO Update

7 February 2011


Much has been said and written about the gap between IT and business and the need for IT to understand business requirements. However, many IT executives try to bridge that gap by aligning IT's capabilities with the direct, yet sometimes conflicting, requirements from various business functions across the organisation.

This is a narrow view of the business.

In order to truly become a business partner, IT executives need to expand this internal, closed view of business requirements by gaining an understanding of its true customers and how the organisation at large, chooses to apply its limited resources to generate profits and compete in the marketplace. This external view of the business strategy should then drive every IT decision.

Who is the customer?

It's not uncommon for IT executives to refer to a business counterpart as "my customer;" usually another executive or manager whose day-to-day operations are supported by IT. This aligns with the view that IT is an internal service organisation fulfilling demand generated by other internal functions.

Although this is an important role for IT to play, it provides a dangerous degree of separation from the external forces that influence the business strategy. Instead, IT should see itself as the business. So then, pursuing this logic further, if IT is the business then who is the customer? IT will need to look outside of the organization for the answer.

The first step to understanding what makes the business tick then is understanding:

  1. which markets and customers the organisation serves or is trying to reach

  2. which services and products are offered to these segments and

  3. which channels are available for customers to "consume" these offerings.

If that information is not readily available as part of the overall business strategy, that should not be considered a show-stopper but an opportunity for IT executives to strengthen the relationship with the business by working with marketing, sales, finance and other business divisions to define and document this in the form of an external services/product catalogue.

Who creates value for the customer?  

Once IT gains a clear understanding of which markets and services are important to the organisation, it can then start looking at which business functions contribute to the provision of these services and what enabling components these business functions rely on. In general, a business function can be said to be comprised of and rely on the "4 Ps"-- people, processes, platforms and places.

Of these four, platforms represent IT's main role in supporting the business -- any equipment and technology used by the business function to carry its activities. This web of dependencies is usually documented as part of an enterprise-wide architecture view and describes how value is created. Most likely the enterprise architecture will include dozens of business functions, hundreds of business processes and thousands of platform components such as hardware, applications, telecom devices and other equipments.

IT’s goal is to make sure that the business functions have at its disposal a resilient, highly available, productive, efficient and cost-effective platform that can rapidly evolve to accommodate shifts in the business strategy (e.g., changes in specific markets, customers and services the organisation chooses or is required to pursue). However, faced with an ongoing mandate to do more with less, IT must find a way to prioritise allocation of its limited resources.

The focus must be on the most critical pieces of the enterprise platform and IT services.

The most critical IT services are the ones that support the most critical business functions. To determine what is critical, IT can leverage a technique employed in business continuity programmes -- the business impact analysis (BIA). The goal of a BIA is to assess the impact to the organisation in case a business function is disrupted and it can no longer perform its functions. The higher the impact, the more critical a business function is. The impact should be assessed as a way to answer the question: How important is the business function to the creation of value to the customer?

Gaining this kind of intelligence is paramount but not an easy task. IT should not expect that these answers will be handed to it by the business. The business functions driving most of the operational IT requirements will most likely not know this. If asked, each business function will tell IT that what they do is critical to the business and thus IT must find a way to support their needs. This Ptolemaic, or geocentric, view is far from reality.

It is important to notice that the results of this work might question the existence of some functions, so it is important that IT take a non-confrontational position and help business functions realign to support critical aspects of the business.

Once again, this is an opportunity for IT to lead and partner with the business to justify their position.

Confronting strategy 

The upfront investment in understanding what makes the business tick will pay off down the road when IT is confronted with a series of strategic questions: Where to invest IT dollars? Which projects to fund? What should be outsourced? What part of the IT platform should be covered by expensive disaster recovery solutions? How to rationalise the IT portfolio? Which services should we retire and what new services are needed?

Although these require different considerations, they all should share one common theme: IT should invest in and support the most critical business functions as dictated by the most critical customers.

So, what do you do with the other stuff, you might ask? Get rid of it!

In sum, the real IT customers are the external stakeholders that are consuming the services and/or products provided by the organisation. IT should work with the business functions to gain a clear understanding of who these customers are. All IT investments should be made to assure that the true customers are getting what they need from the organisation.


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To see PA's pages on IT consulting, please click here.


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