Forget Alignment: How To Co-Create A Business Strategy

CIOs have been struggling with the goal of getting "alignment" with "the business" since the first CIO stepped into the role. The problem with this is that it's fundamentally the wrong goal. "Alignment" implies we are trying to connect two disparate things--"IT" and "the business"--but the reality is that IT must be an integral part of the business fabric.

Integration with the business is a big challenge for many IT groups--a mere 4% identify IT as fully integrated into the business, according to Forrester Research's Global Technology Strategy online survey in Q4 2011. Though a majority of IT groups broadly align to the business, just 21% describe IT as highly aligned.

So what's going wrong, and more importantly how should CIOs fix this?

One answer lies in how CIOs and IT leaders develop technology strategy. We've found that fully integrated IT groups don't try to create an IT strategy that aligns with some defined business strategy. Instead they co-create a business strategy with a technology component.

In the past, Forrester has been just as guilty as other firms touting "alignment." But, attempts at alignment only make things worse for IT. In part this is because few companies have clear business goals and strategies--only 47% of companies have a clearly defined set of business strategies, in our survey. Also, it makes no sense to develop a business strategy isolated from technology considerations, since nearly all strategies depend in large part upon underlying technology assumptions. Developing a technology strategy as an afterthought lets business leaders off-the-hook for responsibility for technology. As one CIO of a large transportation company told us, "We have a master-servant relationship".

To get CIOs out of this hole, Forrester has published the BT Strategic Planning (BTSP) framework as a guide for IT leaders and business leaders who want to co-create a business technology strategy--a business strategy with a technology component. These are the key steps in the framework.

1. Tackle Goals And Objectives First

Before IT and business leaders can co-create anything approximating strategy there must be agreement on the business goals and objectives. Very few companies have clearly defined business goals and objectives. Smart goals are specific, measurable, attainable, realistic, and time-bound. A goal to be the leading supplier of widgets is great as an aspirational statement, but to be smart it would need to be more like this: "By 2014 be the #1 supplier of widgets in the global market as measured by market share in volume sales." We would also need to know that this is attainable--the company can achieve this goal with the resources it has to hand--and that it is realistic--there is reason to believe this company can become the market leader in a little over a year, which would suppose that it is now probably #2 or #3 in the market.

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Business-unit level goals are crucial here. Many companies will hand down a big goal like the one above to their business units, perhaps allocating a portion of the revenue or volume to each unit, and ask the executives in these groups to come up with strategies to achieve the goal. This is often where strategy begins to get refined. And this is exactly where IT strategists need to be involved in the discussion.

2. Model Business Differentiators

IT strategists and business leaders should use high-level business capability maps to identify the strategic capabilities that differentiate their company from competitors. An organization may have one or two, maybe three, of these strategic capabilities. Leveraging technology to improve these key areas will likely to have the greatest business impact. For non-strategic, generic capabilities, the focus should be on simplification to remove complexity and cost. For technology, that means removing custom applications and processes wherever possible.