For years, CIOs have been encouraged to “run IT like a business”. In his latest guest blog, Mark Settle, CIO of Okta, explains that in order to be successful, CIOs must become adept at managing six different business operations.

Academic researchers and industry prognosticators constantly encourage IT executives to “run IT like a business”. At some level, they’re advising IT leaders to develop a deeper understanding of both the costs and the benefits of IT expenditures. Furthermore, they’re encouraging IT leaders to quantify the return on IT investments in much the same  way that ROI criteria are applied to other business expenses.  

Unfortunately, this advice is a little too simplistic. Revenue and profitability are the universal metrics of business success. However, there are significant nuances in the ways in which financial success is achieved in a commodity business versus a manufacturing business versus a retail business, and so on. Customer retention may trump new customer acquisition in certain mature industries. Brand reputation may trump employee productivity. Operational efficiency may trump new product introduction.

Given the complexity of the business world, what does the throwaway phrase, “run IT like a business”, really mean? Most CIOs are acutely aware that they’re running more than one business. They preside over a conglomerate of loosely interdependent enterprises.

To be successful, CIOs must become adept at managing the following six business operations 

1. The Fast Food Business

90% of employees in any company base their impressions of IT’s effectiveness on their personal interactions with the IT Service Desk. They expect Desk agents to be technically competent, emotionally empathetic and highly responsive. They want their requests fulfilled and problems solved in the shortest possible time. This is not a McDonald’s operation with a limited service menu. IT’s service business more closely resembles a New York delicatessen with a 10 page menu of food selections and preparation options.

2. The Utility Business

When power failures occur at home, normal life comes to an abrupt halt. Room temperatures plummet or soar. Food spoils. TVs and laptops become inoperable. When system outages occur within a company’s data center, critical business operations are similarly impacted. Large enterprises that employ private or hybrid clouds to support their business functions must develop the same operational competencies that Pacific Gas & Electric (PG&E) employs to maintain Northern California’s electricity grid. 

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3. The Management Consulting Business

Technology plays such a pervasive role in modern business that it is almost impossible to embark on a major business initiative without IT’s assistance. IT groups routinely work with their business partners to define the problems or opportunities that confront their companies. They frequently take the lead in developing technology-enabled solutions to such challenges. It is not uncommon for IT groups to take broad statements of business strategy or intent and distill them into concrete business requirements and project plans. When they operate in this fashion, they assume the role of management consultants and function in the same capacity as consultants from such firms as Accenture or McKinsey. 

4. The Construction Business

Strategic business initiatives frequently leverage new forms of technology or rely upon new ways of using existing technology. IT is responsible for selecting, installing, configuring, integrating and implementing the systems that underpin the success of such initiatives. Strategic initiatives attract a high level of management visibility due to their scope, cost and potential business impact. IT is expected to deliver technology solutions that support these initiatives on time and on budget. These performance expectations require the same management skills that firms such as Bechtel and AECOM employ in conducting major civil engineering projects.

5. The Retail Clothing Business

Functional teams in large enterprises routinely shop for new business applications. After purchasing a new application, they usually seek IT’s assistance in configuring or customizing it in ways that address their unique needs. Their shopping activities and post-purchase tailoring requirements mimic the processes that we all use to purchase and tailor new clothing. Under these circumstances, IT serves as a ‘personal shopper’ assisting functional teams in selecting new business applications. IT also serves as the tailor, adjusting the fit and appearance of the new application to the needs and desires of individual functional teams. 

6. The News Media Business

IT’s data warehouse provides news about the efficiency and success of business operations. Data warehousing teams generate standard reports that are distributed on predetermined time tables (like newspapers or news magazines). They create dashboards that provide up-to-the-minute snapshots of store traffic, inventory levels, merchandise returns, etc. (like real time Internet news sites). And they generate targeted alerts when significant business events occur (like news text messages). The data warehouse needs to communicate business news to a wide spectrum of business users on both a recurring and ad hoc basis. Warehouse operations bear a close resemblance to those of large news outlets such as the Turner Broadcasting Company or the BBC. 

So, given the diversity of IT’s business portfolio, what does the recommendation to “run IT like a business” really mean?  What’s the definition of success for CIOs who are managing all six of these businesses? Is it some overarching metric such as IT cost/employee or customer satisfaction? Is it a set of business outcomes such as increased revenue or profitability which IT can enable but not achieve solely on its own?  

CEOs, COOs and CFOs rarely take a balanced view of the full extent of their CIO’s business portfolio. They tend to focus on the effectiveness of just one or two aspects of IT’s business operations and ignore the rest. They may value IT’s ability to construct technology systems that support major business initiatives. They may value the availability of reliable, business-critical information to support day-to-day operations. Or they may value the resilience of their company’s data centers.  

New Metrics and Dashboards

Millions of dollars have been invested in the development of dashboards that portray the efficiency and effectiveness of IT organizations. In reality, most of these dashboards fail to reflect the true complexity of IT’s business portfolio. The most sensible approach to constructing future dashboards would be to apply the success metrics employed in the fast food, utility, consulting, construction, retail and media industries to the equivalent businesses that exist within IT.  The results of this type of analysis would be far more instructive in terms of measuring IT success and far more useful in establishing future performance targets for an IT organization.

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