IT - Business Alignment in the Age of Digital Transformation
Date: Tuesday , December 27, 2016
Headquartered in Gurgaon, Usha International is the leading brand in Fast Moving Consumer Durables including products like Fans, Sewing Machines, Home Appliances and Power Products.
Over the years, CIOs have worked very hard to align continuously to business initiatives and to ensure that IT operates in sync with key business imperatives delivering results that matter in a very direct and impactful manner. Achieving this entailed investment of time and efforts in understanding the sales, marketing and finance functions of the business. It also involved governance and compliance priorities and synthesising them into an application strategy that delivers required functionality to the business. Business-savvy CIOs have learnt to anticipate business trends and prepare a pipeline of capability development projects, often running into multiple parallel proofs of concepts with competing technologies to familiarize themselves with what could be tomorrow\'s necessities while they still have the luxury of understanding how these technologies can be applied for solving customer and business issues.
In the golden era of alignment, this led to a win-win situation where the CIO became a trusted partner to the business. CEOs and CFOs had begun to rely on their CIOs to have anticipated industry developments and to be aware of (if not proficient in) various technologies changing the face of their industry. Those CIOs, who were not able to align effectively ended up in the untenable position of being caught flat-footed and unable to respond in time to new requirements. Being aligned closely with the business also meant a higher profile for the CIO in the boardroom since the speed of delivery of solutions had become critical to success at a business level.
However, with the frequent disruption of industries by more nimble and less encumbered competitors such as startups, this positioning and strategy has been challenged and is becoming less and less relevant with each passing day. The CIO challenge is now to be as flexible as possible, helping the organization pivot rapidly to reduce the competitive imbalances with smaller, more efficient competition while at the same time leveraging the scale and established base to drive down costs aggressively. Business functions are often caught unawares by the rapid changes precipitated by these competitors, and information technology is often the only leveller which enables the disrupted to quickly reorganize to better or at least match the product and service offerings from the disruptors.
CIOs nowadays need to proactively find ways in which technology available in the market, even if at a preliminary stage, can be used to disrupt their industry. They also need to improve the muscle tone of the organization to the point where they can offer solutions and support new product and service introduction in short timelines. Additionally, many of the innovations which have come in by way of business practices and acceptable industry norms can be adopted to create lower cost and more efficient operating models.
The need to speak up at the boardroom table has never been more pressing, and CIOs need to rise to the new challenges. This change has not been received kindly by all the key business leaders. Some of the less proactive leaders exist in denial of the disruptive potential of the new entrants, preferring to live in hope that the disruptions are temporary and that they would soon get back to \'business as usual\'. To them, the intervention by CIOs to create the disruptions anticipating the market are seen as threats to continued operations and they sometimes tend to respond in a negative way. They also feel more empowered to challenge the internal disruptions as opposed to the external market where they do not have a choice but to acknowledge and respond to the change!
This challenge often comes back in one of two forms, the sustainability or viability of the disruptor\'s business model, and the likelihood of the disruptive event happening in the first place. Sometimes, this challenge spills over from the professional to the personal, with key stakeholders challenging the business credentials of the CIO and the validity of the assumptions made in structuring the proofs of concept.
For example, when challenged to meet the enhanced service levels provided by e-Commerce players, the excuse of sustainability and viability of competitors\' business models is frequently brought up. Shakeups in the e-Commerce market are discussed widely as expressions of unsustainability of cost structures in the industry and reliance on discounting. Business functions would attribute the better customer service provided by the e-Commerce players to the increased investment brought in and the lower rate of return expected by these players in their initial years. Ideally, there should be openness to consider at least conceptually all of these eventualities and prepare for them as effectively as possible.
So, what does this mean for the traditional alignment which CIOs were practising? Is it now something of the past, with no place in the new paradigm of digital transformation? On the contrary, I believe that the new paradigm calls for significantly greater alignment at a completely different level. CIOs need to work very closely with business unit and functional leaders to help them understand the impact of digital transformation at different levels and address the concerns in a non-threatening manner, driving them to think of ways to improve product and service offerings and decrease costs through innovative use of technology. Successful CIOs will emerge from this situation with higher relevance to the business and potentially a higher profile as well!