If you're a tech executive tired of being instructed to "align IT with the business," you're not alone.
Senior IT leaders genuinely do want to bring their organizations in line with strategic business goals, but often they find the relationship isn't exactly an equal partnership. As Mihir Shah, CTO of the asset management group at Fidelity Investments, quips, "Perfect alignment is when the business gets whatever it wants, whenever it wants."
When resource-constrained IT has to deal with multiple business units simultaneously -- all demanding what they want when they want it -- the situation quickly becomes untenable.
But with digital transformation and innovation accelerating nearly every industry, the pressure is on more than ever to align IT and the business. Is there a better way to forge a more perfect partnership?
Yes, say the folks at MIT's Center for Information Systems Research (CISR), who are championing a concept called "demand shaping."
As crafted by Dr. Jeanne W. Ross, research director at CISR, along with colleagues at MIT and the University of Texas, demand shaping is "a process of ongoing negotiation and learning about a company's most valuable and achievable business change opportunities."
There are six key elements in the MIT CISR toolbox:
- IT cost transparency
- Strategic program management
- Business relationship management
- Post-implementation reviews
- Agile development methodologies
IT executives at Staples, HP, Charles Schwab and BMW have publicly discussed their use of demand shaping. And CIOs that Computerworld spoke with say that demand shaping is a sound method for creating a foundational platform that can serve the needs of subsequent projects.
In other words, in these days when IT departments must do more with less, it's a way to get more bang for the buck.
Demand shaping is "a way to turn the conversation from IT being an order-taker into one where we can enable opportunities with outcomes," says Hervé Coureil, CIO of $26 billion global energy management and automation firm Schneider Electric. "We spend time together with business partners to essentially co-create a platform."
While that's a good idea, it's not necessarily new, industry watchers say. Nigel Fenwick, a Forrester research analyst who's written extensively on alignment strategies, says that -- as much as he respects Ross and her work -- demand shaping is "just a new name for longstanding good tech management practices."
That said, Fenwick supports several of the precepts of demand shaping, specifically the ideas of prioritization, of building a portfolio of reusable digital assets, and of IT co-creating with business leaders rather than taking orders from them.
For her part, Ross acknowledges that IT may already be engaged in many of these activities, but argues that they need to be applied as a portfolio to truly change the IT-business dynamic. "When these tools were introduced to the world, it wasn't as a group," she says. "CIOs need to apply this entire portfolio of tools to change the conversation."
How demand shaping works
The six steps in demand shaping all aim to turn what has traditionally been a one-way interaction -- with IT in the unwanted and ineffective role of order-taker -- into an ongoing, two-way dialogue. "The business needs to provide more clarification to the CIO about where it's going and why, and what outcomes it's expecting," says Ross. "Then CIOs need to say, 'If that's our strategy, then here are the capabilities we need.' There's no point in building capabilities that don't help the company."
The discipline also forces CIOs to focus on the whole organization, rather than individual business units, and to set and pursue long-term priorities rather than short-term goals. "CIOs want to meet needs and keep people happy. But if there is no clear prioritization of what's important [for the entire company], IT can't be strategic," Ross explains.
Before Shah became CTO in Fidelity's asset management group, the IT budget was divided among seven business units within the group, each of which got to choose how to spend its portion of the budget. "They all had good intentions, trying to optimize everything within their control," Shah says, but the stratification nevertheless represented the loss of a significant opportunity.
"You have to optimize the IT portfolio as a whole for the coming five years, not just one year," Shah says. "If I look at the budget devoted to IT, each division might have, say, $25 million for one year. But if someone told me I'd get $1 billion over five years, I would come up with the completely different strategy."
Aggregating demand, eliminating duplication
One of the key advantages of demand shaping, Shah says, is that it allows IT to aggregate requests and eliminate duplication. If three projects needed security architecture, his team would assign one initial project to build it and the second two to follow in sequence. "If you sequence it right, each project uses the architecture created by the earlier project. That's a much more efficient way of spending money."
Where most CIOs don't have the capacity to deal with more than four big projects in a given year, Shah's group does ten times that many. "We did it by restructuring IT around platforms and products. One of the benefits was that we were not building platforms again and again. That gave us the ability to scale."
It can be a challenge to communicate that value to the business units. "You can spend the IT budget in two ways -- either by investing in architecture or investing in business functionality," Shah says. If you give business units a choice, they typically want new functionality at the cost of investments in modernization, he explains. "But with demand shaping, you get a balance between new functionality, paying off technical debt and investing in new platforms."
Schneider Electric likewise is using demand shaping to eliminate duplication and scale its IT efforts worldwide. "We're building global reusable capabilities, transferable to multiple business units in multiple countries," says Coureil.
"How we spend money is changing too," Coureil reports. "The amount of money we've been spending in global programs is greater than the amount we've been spending answering specific needs with point solutions. To me, that's a sign of getting better at demand shaping."
Platforms built for reuse
An important facet of demand shaping is the concept of reuse, which falls under the element of strategic program management. As an example, Schneider Electric faced a question about how to improve its cross-selling capabilities. "We could have just taken the order to 'improve cross-selling,' but instead we engaged in discussions, and it evolved into a bigger project that helped us create a customer engagement platform, says Coureil.
Based on Salesforce.com, the new system is used by the call centers, among other departments, to drive a higher level of customer interaction. Coureil won't reveal numbers, but he says the new system offers quantifiable benefits.
"Whatever we do now, whatever new business model [we launch], it will leverage the new Salesforce platform," says Coureil. "It's a nice feeling when you start reusing, because it helps you get away from point solutions."
Where to start
Arguably one of the reasons IT executives may not be tackling demand shaping as CISR defines it is its scope. Each one of its six elements can be a tough obstacle to overcome. That leaves the question of where to start -- a topic on which no one agrees. Ross herself doesn't dictate which tenet to tackle first, so long as organizations start somewhere.
To illustrate the challenge: Fidelity's Shah believes that organizational change -- which could conceivably fall under strategic program management -- should come first. "Having a new strategy and not having a new organizational structure doesn't work," he says.
"We are moving away from individual projects to building business capabilities on top of platforms. The platforms and data are horizontal, but people aren't organized that way," Shah explains. "You need someone to own the horizontals."
As a result, Fidelity's asset management function now has a group focused on data and a group focused on platforms. The enterprise architecture group was centralized too. "Now everyone is on the same page, and they're getting a real sense of delivering results."
Ross suggests that IT cost transparency is a good place to start. "It's hard to get traction with the other steps if you don't have financial management," she says.
Couriel believes that you have to focus your efforts when it comes to business relationships. "Don't try to do everything at the same time. Concentrate your forces on a limited number of efforts."
But whichever tack you start with, start.
To Shah's mind, demand shaping is a way to address the digital transformation enterprises are trying to achieve. "These issues aren't a problem in startups. Small companies start with the right architecture and organizational structure. If you want to be competitive, you have to do this, because otherwise these small companies are going to eat your lunch."