Getting On Track

Dec. 21, 2004
Alignment of information systems with business strategy isn't easy to achieve or maintain.

Would you pay a taxi driver who took you someplace you didn't ask to go? Or buy a car that had an engine that was disconnected from the transmission? Or fund an information systems project that didn't support your business? In each case, of course, the answer is no. We refuse to pay for something that doesn't take us where we want to go, fails to deliver the energy it promises, or lacks a direct connection to corporate goals. Unfortunately, in the world of information systems (IS), corporations have been paying full freight to go to Schenectady when it was Florida they really wanted to get to. So what went wrong? And how can it be fixed? The answers may be elusive, but the problem is one that isn't likely to go away, either. Generally referred to as alignment--or the lack thereof--it means how well your information technology is matched up in support of the strategy of the business. It's such a concern for most large companies that alignment has ranked as the No. 1 issue facing information executives for the last three years, according to a 1997 survey by Computer Sciences Corp. of 613 CIOs at major companies worldwide. In Europe, for instance, 56% of CIOs equate success in aligning IT with the business as the leading contributor to success of their operation. The reason alignment is such a hot button is that it's not easy to achieve, or maintain--as scores of businesses have found over decades of trying. "Systems people sometimes go off and do things that are not in direct support of the strategy," says Don Birk, partner in charge of management consulting in the Minneapolis office of Grant Thornton. Adds Martin Piszczalski, industry analyst for manufacturing and information technology at Sextant Research Inc., Ann Arbor, Mich., "The problem is that IT goes off in their own universe, adding bells and whistles nobody wants." Others place the lion's share of the blame on senior executives who fail to appreciate information technology. "Many CEOs acknowledge that strategic business objectives have not always been carefully communicated," writes Charles Wang, CEO of Computer Associates International Inc., one of the world's largest software firms, in his latest book, Techno Vision II (1997, McGraw-Hill). "Many have neglected to consult their IT staffs until after they have formulated such strategies." Others, Wang says, fail to recognize the central role IT can play in fulfilling business goals. Part of the problem has been senior management's traditional view of IS as just one more support unit, similar to the legal department, human resources, or corporate communications. You called them in when you needed to automate a process, write a new piece of software code, or order new computers. It wasn't as if they had much to do with the way the business was run from a strategic standpoint. "Traditional IT strategy has been an outgrowth of the business strategy and the operating strategy of a company," observes Bob Donohue, managing director in charge of North American consulting for Arthur D. Little Inc. in Chicago. But that attitude is changing, Donahue believes. Many business executives today are moving swiftly to ensure that their IS and business units are working coherently to deliver the maximum benefit of technology to the organization. "I think there is a shift in some companies that recognize the opportunities and the value that IT brings to the table today," Donahue adds. "The best companies are really valuing the power of IT and realize that their IT strategy can help drive the business strategically. At these companies, the IT representative sits at the table with the opportunity to help, guide, direct, and define the strategy of the business." Sometimes, the technology is used actually to define the way the business will be run on a daily basis. That's the case at Carpenter Technology Corp. Each night the $1 billion specialty steelmaker rebalances a highly complex production schedule using a sophisticated scheduling system from i2 Technologies Inc. Figuring out what product to run and when to run it is no gimme when you are producing and distributing more than 22,000 different items in 400 different alloys. These products, which range in diameter from 30 inches down to one-third the size of a human hair, are made at 1,100 work centers. The whole idea is to serve more rapidly Carpenter's 14,000 customers around the world. The successful application of technology to solve that business problem hasn't been lost on Bob Cardy, chairman, CEO, and president of the Reading, Pa.-based steelmaker, especially since the result has been a vast reduction in both finished and process inventories. "It's a monster task," he says of the scheduling predicament. "We used to have piles of finished and process inventory and piles of raw materials throughout the mill. The use of that technology allows us to do just-in-time manufacturing and to minimize our inventories. IT is an integral part of our business." So integral, in fact, that Cardy himself has a PC in his office that he uses each morning to check the previous day's production. But he's quick to point out that Carpenter is careful not to use technology for technology's sake. "We don't get enamored of technology, only to the extent that it improves the business. Just plopping a computer into production doesn't help you." Typically, business units in a company that are being well served by IS are those that have done some major reworking or revising of their processes or have installed new technology to help them accomplish new business goals. For instance, Ciprico Inc. shifted its business strategy from a maker of controller boards to a manufacturer of high-bandwidth data-storage products for visual computing. The shift required a move from a basic manufacturing-resource-planning system to more of a customer-oriented enterprise-resource-planning (ERP) system. "We need to provide faster and more improved data analysis of our customers and their needs," says Cory Miller, vice president of finance and CFO at the Plymouth, Minn. firm. "This will provide us the ability to link sales leads, track quotes, and manage customer contact data--including feedback from customers on our products--all in one centralized file, instead of keeping that information in each person's PC." One reason for the change in attitude and awareness on the part of senior management is that as some of the bloom has come off the once-popular idea of saving costs through business reengineering, there is a new focus on growth and innovation "to attack new market segments and drive revenue growth," says Arthur D. Little's Donohue. "We now see technology being used innovatively to assist in aggressive R&D and product-development functions." In an effort to get rid of disparate systems and operate on a single information platform, many manufacturers installed ERP systems in the early and mid-1990s. While not able to deliver much in the way of competitive advantage, these systems today afford their users new opportunities as a foundation for another level of more specific "bolt-on" applications. These include knowledge-management systems, product-development applications, customer-management systems, and supply-chain software. "If you still have disparate systems, you are handicapped in trying to do those things," Donohue says. Another way companies have tried to ensure that IT and the business work harmoniously is to find a CIO from a business--as opposed to technology--background. Many CEOs, in fact, have suffered the "disconnect" that Wang talks about in his book when trying to talk business with their CIOs. "The CEOs and COOs I talk to are really frustrated with IS," says Roger Covey, CEO of System Software Associates Inc., a maker of ERP software headquartered in Chicago. "But in the last couple of years, the nature of the CIO job has changed, and we see a lot more business people in CIO jobs." Farmland Industries Inc. CIO Kent Nunn is one. With a background in accounting and law, Nunn views technology purely as an enabler. But to ensure that the agricultural organization's IT activities would not only keep pace with changes in the business, but actually anticipate the future, Farmland recently set up a joint venture with Ernst & Young. "It was clear we needed to get the IS and the business functions ahead of the changes taking place in the business units," he says. Rather than purchase IT consulting services "by the drink," as CIO Nunn puts it, Farmland's new joint venture is charged with providing the strategic technology needed to carry the organization through and beyond the reengineering and transformation of its business. A $9 billion food cooperative based in Kansas City, Farmland has some mighty ambitious goals that can be achieved only through technology. The joint venture with Ernst & Young will be the provider of information-management services, training, and support, as well as for technology-based solutions in response to Farmland's business needs. "It will serve as a catalyst for the transformation of Farmland's business," Nunn says. Farmland will use SAP R/3 as the core for its centralized information system, and other software from Agris Corp. to connect directly to its member cooperatives. Finally, the Internet will be used to make the ultimate connection to some half million farmers. As the company evolves from a producer of commodities to a producer of specific kinds of foods, the ability to track the source of particular grains or beef becomes important. "For farmers who are providing genetically engineered animals for leaner meats, we want to be able to track them through the supply chain to reward them accordingly," Nunn explains. One problem that cuts straight to the heart of the "disconnect" between IS and the business is the fact that business issues, problems, and goals are always in flux. Thus, while a system a company plans to install over the next two years may be right for the business needs of today, by the time it's fully rolled out throughout the enterprise, it's often out of sync with the new business reality. "You don't know what tomorrow's objectives are going to be," says Covey. "Yet, it's not uncommon for people to tell you it takes them three to five years to get a new system in place." Others say the "disconnect" stems from the lack of a process or system to monitor and check results. "It's disconnected because the majority of companies don't have the integration between IS and the business that is necessary," says Tim Ramos, vice president and director of the ERP Center of Cambridge Technology Partners Inc. (CTP) in San Ramon, Calif. "They haven't implemented a process that continues to monitor and check whether a project is delivering what it promised." Some consultants take a different tack. At Grant Thornton, for instance, the firm takes a close, hard look at the client's strategy and existing IS operation. "If the company's real hot button for their strategy is international, then we look to see if the IT project or projects they are working on support that," Birk says. "And one of the basic questions is, how important is IS going to be to the overall business?" In other words, to a bank, IT is absolutely critical to its business, because financial services depend so heavily on customer information. "But with some manufacturing firms, it may not make a big difference." Ciprico's way to ensure that its technology is supporting the business goals is to have cross-functional business teams assess the company's processes and evaluate possible solutions. "I see IT as a business driver to help us achieve 25% to 30% growth and to enable our employees to make decisions faster," Miller says. For many businesses, something as important as measuring the relative profitability of a customer can be done only via IT. "Many companies' current IS can't answer the customer-profitability question," Birk says. Unfortunately, he adds, "Only IS can get them the answer."

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